South of the Border ETF Opportunity and Risk

The $1.5 billion EWW, which debuted in March 1996, holds 62 stocks. The ETF allocates 45% of its lineup to consumer staples and financial services names. Materials and telecom stocks combine for almost 31% of the ETF’s weight.

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 Deutsche 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.

The peso is an important part of the Mexico investment thesis because exports account for over a third of GDP in Latin America’s second-largest economy. So are oil prices because Mexico is one of the largest non-OPEC producers in Latin America.

“Given valuations today, many investors are simply holding on to their Mexican positions, waiting for more clarity from the U.S. administration on trade and immigration policies–or for a market correction that would bring down valuations,” according to Morningstar.

For more information on the Mexican markets, visit our Mexico category.