EWW holds 61 stocks and trades at valuations above those found on the MSCI Emerging Markets Index. The ETF allocates almost a third of its weight to consumer stocks, highlighting its domestic focus, but reminding investors the fund serves as a play on Mexico’s local economy as well as being an export story.

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.

“Consumption continues to grow defying, once again, expectations of a pronounced deceleration. In the first quarter of the year consumption increased 2.8% qoq saar. But that is already some deceleration from the 3.2% qoq saar pace of 4Q 2016 and an even more pronounced deceleration from 6.4% qoq saar in 3Q 2016. Furthermore, using monthly data from private consumption to retail sales it is clear that the level of consumption is flattening (Chart 2). So the rates of growth are masking further deceleration at the margin,” according to the Merrill Lynch Mexico note seen in Barron’s.

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

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