Formerly Dumped on Trump, Mexico ETF Has Surged This Year

The Mexico country-specific exchange traded fund has been among some of the best emerging market performers this year, surging on a quickly appreciating Mexican peso as the U.S. dollar weakened against a basket of international currencies.

The iShares MSCI Mexico Capped ETF (NYSEArca: EWW), the largest exchange traded fund dedicated to Mexican equities,jumped 30.2% year-to-date, compared to the 11.8% gain in the S&P 500.

Alan Alanis, Latin America equity strategist at UBS, attributes the surge to three defining factors: a weaker dollar, diminishing concern over U.S.-Mexico trade relations and better-than-expected economic growth from Mexico, reports Fred Imbert for CNBC.

“The first, and by far the most important one, is currency. The Mexican peso went from being the worst-performing currency against the dollar to being the best-performer in 2017,” Alanis told CNBC. “Of the 30 percent gains in the EWW, two-thirds of those are currency-related.”

The U.S. dollar has depreciated 14.3% against the Mexican peso year-to-date to MXN17.78.

EWW tries to reflect the performance of the MSCI Mexico IMI 25/50 Index, which does not hedge its currency risks. Consequently, a strengthening peso has translated to an improved U.S.-dollar denominated return for EWW investors.