The iShares MSCI Mexico Capped ETF (NYSEArca: EWW) surged more than 17% in the first quarter, easily outpacing the MSCI Emerging Markets Index to rank as one of the quarter’s best-performing single-country emerging markets exchange traded funds.
With the peso also sliding in the wake of Trump’s win, the Mexico’s central bank could move forward with more rate hikes to stem the currency’s slide. Although Mexico’s central bank said the first rate hike earlier this year was not the start of a new tightening cycle, the central bank surprised global investors last month when it boosted borrowing costs by 50 basis points to 4.75%, which is good for the country’s highest interest rate since 2009.
Still, perhaps due in large part to its proximity to the the U.S., Mexico is often viewed as one of the safer emerging markets for investors, but some data points suggest otherwise.
“In fact, the scores for Hungary, Turkey, Brazil and Russia for the same risk factor are lower than they are for India, and all four countries are below India in the global rankings, making them all riskier prospects, with Russia eight points worse off on the gamut of risk metrics,” according to Euromoney. “Mexico admittedly fares better in the rankings, holding onto 37th place, on a score of 60.5 points, but is still eclipsed by Chile, on 75.5 points in 16th place, which is only marginally behind the US.”