Take A Look At Mexico ETF On Ratings Downgrade (EWW)
The iShares MSCI Mexico Investable Market Index (NYSE: EWW), the primary ETF tracking Mexico's equity markets, has been a solid performer, especially when considering the economic problems facing Mexico.
EWW has gained about 27% in the past six months, but those returns may be challenged in the near term. Mexico’s credit rating was cut by Fitch Ratings as tumbling oil production and Mexico's worst recession since the 1930s have led to a surge in the budget deficit.
Fitch lowered Mexico’s foreign debt rating one level to BBB, the second-lowest investment grade, from BBB+. Last week, Mexico said its third-quarter GDP contracted by 6.25 and the forecast for 2009 calls for a contraction of 7.5%.
If oil prices continue to sputter, that would hamper the Mexican economy further. Sooner or later these fundamentals are likely to catch up with EWW and the results aren't going to be pretty.
