Market Overview

Under The Hood: The Other Mexico ETF

When considering that Mexico is the second-largest Latin American economy behind only Brazil, it's somewhat surprising that this southern neighbor of the U.S. is underrepresented in the ETF world. At least from the standpoint of country-specific funds.

Mexico is fairly well represented in multi-country ETFs that track Latin America, such as the iShares S&P Latin America 40 Index Fund (NYSE: ILF), but until earlier this year, there was just one noteworthy Mexico-specific ETF: The iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW).

Well, Global X changed that on May 5 (Cinco de Mayo coincidentally) with the introduction of the Global X Mexico Small-Cap ETF (NYSE: MEXS), today's Under The Hood candidate. The reality is MEXS is a good idea. Mexico's economy is large enough to merit at least one small-cap ETF. There are two small-cap ETFs devoted to Brazil and at least one for Latin America as a region, so why not have a small-cap fund for Mexico?

There is more reality and it's of the cold, harsh variety, as in timing. As in bad timing. MEXS has been plagued by a move away from both small-caps and emerging markets and has tumbled 26% since its debut. That makes the 17% loss for EWW over the same time look good by comparison.

Those glum days could be in the past as U.S. stocks have started to look like better deals than their European and emerging markets counterparts, according to some analysts. Add in some decent or less bad U.S. economic data and MEXS could be offering some value at $11.50.

To be sure, MEXS is an ETF that is intimately levered to U.S. and Mexico's economic strength. Proximity to the U.S. is perhaps the most important thing to consider with any ETF heavy on Mexico exposure. Specific to MEXS, consumer discretionary and industrial names account for 54% of the ETF's weight.

Consumer stapes and financials combine for roughly another 32% of MEXS, which is home to 27 stocks and an expense ratio of 0.69%. Thus far, MEXS has attracted just over $548,000 in assets under management. However, this sluggish start could easily give way to a flurry of new cash coming in as investors realize MEXS is a hidden gem in the LatAm ETF universe. Bullish above $11.50 and VERY bullish above $13.

Posted-In: Long Ideas News Short Ideas New ETFs Small Cap Analysis Emerging Market ETFs Technicals Global Best of Benzinga

 

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