Let’s analyze the investment opportunities in Mexico, a rapidly developing country, and an ETF that presents itself as the best for this purpose.
Investing in Mexico is a fascinating prospect for investors seeking growth opportunities in one of Latin America’s major economies. Mexico offers a diverse economic landscape full of potential, with sectors such as industry, agriculture, services, and manufacturing contributing significantly to its GDP.
For investors looking to access this growing market, the use of Exchange Traded Funds (ETFs) can be an attractive solution. ETFs offer an efficient way to participate in Mexico’s performance without the need to manage individual stocks. In this article, we will examine the best ETF for investing in Mexico, examining the selection criteria, key features, and potential advantages for investors interested in this dynamic economy.
Mexico: a rapidly growing market
Mexico, one of the fifteen largest economies in the world, stands as the fourth economic power in the American continent, preceded only by the United States, Canada, and Brazil. Despite this recognition, the country is infamous for notable disparities in income, investment, and development between its different regions, urban areas, and social classes.
The Mexican economy faces complex and urgent challenges, including climate change, the emergence of violence and organized crime, and political stability. Over the past few years, Mexico’s economy has gone through a series of changes. For example, the distribution of gross domestic product (GDP) across economic sectors has varied considerably.
In 2022, the agricultural sector contributed approximately 4.15% to GDP, while the industrial sector accounted for 32.13%, and services made up 58.77%.
One of the most significant transformations has been the growth of the Mexican manufacturing sector, aided by growing demand for Chinese workers seeking fairer wages and rising transportation costs from China. This has made Mexico a more competitive option for numerous industries serving the lucrative U.S. market. However, the Mexican economy continues to defy expectations, trying to keep pace with the growth and success seen in other emerging economies such as the so-called "BRICS", as well as established economies such as the United States and Canada. The complexity of the Mexican economy and the challenge of addressing these varied dynamics make the country a subject of considerable interest and attention in the global arena.
Xtrackers MSCI Mexico UCITS ETF 1C
The Xtrackers MSCI Mexico UCITS ETF 1C is a financial product that replicates the performance of the MSCI Mexico index, which follows large and mid-cap Mexican stocks. This review provides a detailed and professional analysis of the ETF, taking into account various relevant aspects.
Fundamental Data
- Asset Management: The ETF has assets under management of $148 million, indicating a significant fund size.
- Launch/Listing Date: The ETF was launched on March 26, 2010.
- Distribution Policy: This ETF follows an accumulation policy, which means that the dividends generated by the underlying shares are accumulated and reinvested in the ETF.
Index Replication
The ETF tracks the MSCI Mexico Index with full physical replication, which means that all components of the index are actually purchased and included in the ETF. This replication method is considered one of the most accurate in tracking the performance of the underlying index.
Expenses
The total expense ratio (TER) of this ETF is 0.65% per annum. Expenses are an important factor to consider when investing in ETFs, as they affect your overall return. This value is in line with other products that invest in the topic.
Currency and Currency Hedging
The ETF is denominated in US dollars (USD) and does not offer currency hedging. Investors should be aware of the risks associated with currency fluctuations when investing in ETFs denominated in currencies other than their own.
Sectoral Composition
The ETF has a diversified sector composition, with increased exposure to the following sectors:
- Basic necessities: 34.29%
- Telecommunications: 22.31%
- Raw materials: 15.81%
- Finance: 13.84%
- Others: 13.75%
The ETF’s top 5 holdings include stocks like MX01AM050019 (16.00%), GRUPO FINANCE BANORTE ORD (11.95%), FOMENTO ECONOMIC MEXICANO ORD (11.91%), WALMEX V ORD (11.20%), and GRUPO MEXICO CL B ORD (8.02%).
Return and Risk
- Historical Performance: The ETF’s performance has shown significant variation over time. Over the last 3 years, the ETF has seen a notable increase of +78.88%. In 2022, the ETF generated a return of +3.40%, while in 2021, it achieved a notable +32.30%. However, it should be noted that it recorded a loss of -10.78% in 2020.
- Volatility: The ETF’s annual volatility was 20.63%, which indicates a certain degree of risk associated with this ETF.
- Maximum Drawdown: The maximum drawdown of the ETF, which represents the maximum loss recorded in a given period, was -16.38% over one year, -16.38% over three years, and -45.54 % in five years. The maximum drawdown since the ETF’s launch was -53.88%, which highlights the need to be prepared for significant fluctuations in the value of your investment.
The Xtrackers MSCI Mexico UCITS ETF 1C offers investors the opportunity to participate in the performance of the Mexican stock market with a full physical replication of the MSCI Mexico index. However, it is important to keep in mind that the ETF is subject to significant volatility, as evidenced by its return history and maximum drawdowns. Investors should carefully consider their risk tolerance before investing in this ETF. Additionally, they should carefully evaluate the expenses associated with the ETF, which represent an ongoing cost to investors.
| Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings. |
Original article published on Money.it Italy 2023-10-31 17:31:28. Original title: Investire nel Messico, il miglior ETF per cogliere l’opportunità
