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Some Mexico ETFs Have Endured Trump...Sort Of

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Some Mexico ETFs Have Endured Trump...Sort Of
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Since it became apparent that Donald Trump was a credible presidential candidate, few if any exchange traded funds have been as inversely correlated to the new president's musings as the iShares MSCI Mexico Capped ETF (NYSE: EWW).

In addition to the peso being one of the world's worst-performing currencies last year, EWW, which isn't currency hedged, was a dud in what was mostly a solid year for emerging markets equities. EWW, the largest Mexico ETF trading in the U.S., slumped 10.3 percent last year while the MSCI Emerging Markets Index jumped 10.9 percent.

Making EWW's struggles all the more alarming was that the ETF slid as Latin American stocks rose. For example, the iShares S&P Latin America ETF (NYSE: ILF) gained more than 32 percent in 2016.

Trump's impact on EWW and the peso have been apparent again this year. Amid renewed tensions regarding Trump's plans to build a wall around the U.S./Mexico border, Mexican President Enrique Peña Nieto on Thursday scrapped a meeting with Trump, sending the peso and EWW lower.

There are some signs, though modest, that investors are finally growing concerned about EWW in the era of Trump. Year-to-date, EWW has bled nearly $17.1 million in assets after surprisingly adding almost $735 million in new capital last year.

Investors believing in the possibilities of a rebound for Mexican stocks while the peso continues to languish would do well to consider currency hedged ETFs, including EWW's currency hedged counterpart, the iShares Currency Hedged MSCI Mexico ETF (NYSE: HEWW). HEWW holds EWW with a currency hedged overlay.

The Deutsche X-trackers MSCI Mexico Hedged Equity ETF (NYSE: DBMX) is the season veteran of the Mexico currency hedged ETF stable having debuted three years ago.

As it frequently does with other regions, currency hedging is proving advantageous with Mexico ETFs. Credit Trump or not, but there's no refuting that over the past 90 days EWW, is down nearly 13 percent. DBMX and HEWW have been significantly less bad, though still lower.

HEWW has tumbled 9.6 percent over that stretch while DBMX is lower by 7.6 over that period. Over the past two years, Mexican stocks have been laggards, but DBMX and HEWW have been been less bad than EWW during those 24 months.

Posted-In: Long Ideas Emerging Markets Emerging Market ETFs Currency ETFs Politics Forex Markets Trading Ideas Best of Benzinga

 

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