Mexico's Slowing Inflation Could Elevate This Leveraged ETF

The beauty of getting international exposure is the diversification it offers to not just long-term investors, but also traders. Different economic conditions offer variance, such as Mexico, which is seeing lower inflation.

September inflation numbers in the first half of the month are giving Mexico bulls something to cheer.

“Mexico’s headline inflation eased in the first half of September, official data showed on Friday, with the president calling on the central bank to focus on promoting economic growth given the improving inflation data,” reported Reuters.

While lower inflation is welcome news, Mexican president Andres Manuel Lopez Obrador also noted that Mexico’s economic growth needs addressing. This presents more of a long-term goal as the country’s near-term growth doesn’t necessarily spell doom as a Federal Reserve Bank of Dallas analysis indicated.

“The other task that they must carry out little by little is also that of promoting growth. If not, we’re talking about the Bank of Mexico standing on just one foot,” the president said. “The best thing is the balance where there’s no inflation and there’s growth.”

Mexico’s central bank has also taken the necessary strides to address rising inflation, which is putting upward pressure on the dollar versus the peso. The country’s central bank instituted its own rate hikes to help cushion the blow, minimizing the impact to its local currency.

“Aggressive interest rate hikes by Mexico’s central bank in anticipation of and in response to U.S. interest rate hikes and global inflation have contributed to this stability,” the Dallas Fed said.

Reuters Graphics

Play Bullishness in Mexico

The rate-hiking cycle has been applying downward pressure on emerging markets (EM) assets, but once the U.S. Federal Reserve starts to back off from its tight monetary policy and the dollar eases, EM assets could potentially flourish. That said, there are still opportunities to take advantage of such as in Mexico.

In terms of GDP, Mexico presents the second largest economy in Latin America. For traders who wan to play short-term opportunities in Mexico, consider the Direxion Daily MSCI Mexico Bull 3X Shares (MEXX).

With its triple leverage ability, MEXX seeks daily investment results equal to 300% of the daily performance of the MSCI Mexico IMI 25/50 Index. The index is designed to measure the performance of the large-, mid- and small-capitalization segments of the Mexican equity market, covering approximately 99% of the free float adjusted market capitalization in Mexico.

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