Mexican stocks and country-specific exchange traded fund continued to retreat, following Donald Trump’s presidential election victory, with a quickly depreciating peso currency putting investors on edge.
The iShares MSCI Mexico Capped ETF (NYSEArca: EWW), which holds broad range of companies in Mexico, declined 8.5% on Thursday while the benchmark Mexican Stock Exchange Mexican Bolsa IPC Index declined 4.6%.
Further dragging down EWW, the Mexican peso currency depreciated another 4.0% to 20.63 against the U.S. dollar on Thursday.
The Mexican peso experienced its worst two-day loss in 22 years as investors worried about how U.S. president-elect Trump’s policies could affect exports from our Southern neighbor, reports Michael O’Boyle for Reuters.
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Citigroup strategist Dirk Willer believes the bloodletting hast just started and the peso currency could weaken to 22 per dollar
“Given the nature and size of the shock, the sell-off is unlikely to last only a day,” Willer said in a note.
[related_stories]If Trump enacts protectionist policies and increases tariffs on Mexican imports into the U.S. as he promised on the campaign trail, it could hinder growth for the Latin American emerging economy.
Investors who anticipate further weakness out of Mexican equities can turn to the ProShares UltraShort MSCI Mexico Investable Market ETF (NYSEArca: SMK), which tracks the -2x or -200% daily performance of the same underlying index as EWW. SMK surged 15.0% on Thursday.
On the other hand, investors who believe the Mexican peso may continue to depreciate but anticipate the markets will improve can look to currency-hedged ETF strategies to diminish the currency risks. For instance, the db X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX) and the recently launched iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW) provide exposure to the Mexico’s market without the added currency risk of a depreciating peso currency.
For more information on Mexican markets, visit our Mexico category.
iShares MSCI Mexico Capped ETF