Prior to a recent pullback that has seen the ETF lose nearly six percent in the past month, the iShares MSCI Mexico Investable Market Index Fund (NYSE:
EWW) had been one of the best-performing country-specific ETFs in 2012. Recent political action out of Mexico could mean EWW's retrenchment is a buying opportunity for patient investors.
Earlier this week, Mexico's senate passed important labor reform legislation. Mexico's labor market has previously suffered from rampant underemployment and slack job creation,
Barron's reported. The new labor reforms are aimed at bringing some relief to those issues.
Barclays' Marco Oviedo called the reforms a "very important structural advance," according to Barron's. EWW and the Mexican economy have already been benefiting from an influx of manufacturing jobs from China. Rising wages in China have sent some manufacturing jobs to Mexico and due to higher fuel prices, some U.S. firms have favored production of goods in Mexico over China due to the former's proximity to the U.S.
As for EWW, the ETF
has more than doubled the gains of Mexico's benchmark Bolsa IPC Index this year.
Wages are rising in Mexico, as well, and
GDP growth there could be as high as five percentEMDD) was designed as an explicit play on growing domestic consumption with developing nations.
EMDD, which debuted in August, allocates over 51 percent of its weight to consumer goods and services stocks. Mexico dominates EMDD's country weights with an allocation of 24.4 percent. The next largest country represented in the ETF is India at 15.3 percent.
Telecom giant America Movil (NYSE:
AMX), Wal-Mart de Mexico, Fomento Economico (NYSE:
FMX) and Grupo Modelo (OTCBB: GPMCY) are top-10 holdings in both ETFs.
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