Monday, August 9, 2010

Investing In Mexico: The Vibrant Latin American Economy

For years the most prominent feature of Mexico has been its exotic cuisine with all its varied flavors, colorful decoration, and variety of spices while investment options were never taken seriously. Investors for long have viewed other Latin American economies like Brazil and Argentina with more interest discussing plans possibly sitting in a restaurant serving Mexican cuisine. While Mexico doesn't quite enjoy the celebrity status of rival Brazil, there is no denying the fact that the country is undergoing something of an economic renaissance. With its last financial crisis more than 10 years behind it, Mexico is enjoying record foreign currency reserves and an investment-grade debt rating, thanks to much-improved fiscal discipline. It even boasts several companies listed on the New York Stock Exchange or NASDAQ and dozens of others that trade over the counter. Money managers are especially keen on stocks in the residential construction business as more and more Mexicans qualify for loans to build their own homes.

  • The Mexican economy rebounded in the first quarter of this year, expanding more than 4 % from a year earlier after contracting 2.3 % in the last three months of 2009.
  • Mexico’s international reserves reached a record $95.7 billion in March. The oil and manufacturing sectors are showing strong improvements and Mexican exports increased by 39% in March relative to March 2009.
  • The automotive industry, one of the most important industries in the country, is recovering strongly with production and exports up in the first four months of this year. The unemployment rate in the first quarter stood at 5.3%.
  • Rich in farmland, silver and copper, Mexico is the world’s 11th largest economy and is known for being a free trade economy that is heavily geared towards exports. Mexico’s trade is based on free trade agreements with more than 40 countries, including Japan, Israel, EU and various Central and South American countries.
  • Mexico provides security and legal protection for foreign investors through Bilateral Investment Treaties (BIT’s) negotiated with 24 countries and a skilled and competitive labor force.

Mexico’s peso has been a major gainer against the dollar in recent weeks as an economic recovery in the U.S. fuels demand for the Latin American nation’s exports. Mexico’s economy is looking at a 5% growth rate as it recovers from the recession this year. The official forecast is set at 4.1%. With as many as six Mexican companies looking to go public this year, a rise in the Mexican IPO activity might just be the catalyst for speeding up the country's economic growth. There are a number of ways to include Mexico in your investment portfolio. Here is a list of some the best performing Mexican ETFs.

Top 7 ETFs To Invest In Mexico

MSCI Mexico Index Fund (EWW): The index measures the performance of the Mexican equity market.

EWW Top Ten Holdings

1. America Movil S.A.B. de C.V. (AMXL): 23.66%
2. Wal-Mart De Mexico SAB de CV (WALMEXV): 9.09%
3. CEMEX SAB de CV (CEMEXCPO): 6.62%
4. Grupo Mexico, S.A.B De C.V (GMEXICOB): 4.94%
5. Grupo Televisa SA (TLEVISACPO): 4.67%
6. Fomento Económico Mexicano, S.A.B. De C.V. (FEMSAUBD): 4.67%
7. Telmex Internacional S.A.B. de C.V. (TELINTL): 3.74%
8. Grupo Financiero Banorte, S.A.B De C.V. (GFNORTEO): 3.61%
9. Telefonos de Mexico,S.A.B. de C.V. (TELMEXL): 3.34%
10. Carso Global Telecom (TELECOMA1): 3.12%

Expense Ratio: 0.52%

EWW Sector Breakdown

Telecom 34.88%
Industrial Materials 21.21%
Consumer Goods 13.59%
Financials 11.48%
Consumer Services 10.25%
Media 5.09%
Business Services 2.82%
Health Care 0.39%

Mexico Fund Inc. (MXF): The Mexico Fund, Inc. (the Fund) is a closed-end, non-diversified management investment company. The Fund's investment objective is to seek long-term capital appreciation through investment in securities, primarily equity, listed on the Mexican Stock Exchange. The Fund may invest in Mexican fixed-income securities and bank time deposits of Mexican banks.

Top 10 Holdings

America Movil, S.A.B. de C.V. 19.23%
Wal-Mart De Mexico SAB de CV 10.46%
Grupo Mexico SA De CV Gmexico 7.54%
Grupo Televisa SA 4.99%
Fomento Económico Mexicano, S.A.B. De C.V. 4.21%
Kimberly Clark de Mexico SA de CV 4.04%
Cemex S.A. 3.74%
Mexichem, S.A.B De C.V 3.74%
Grupo Financiero Banorte, S.A.B De C.V. 3.33%

Total Expense Ratio: 1.72

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