Williamstown, MA, July 26, 2008 --(PR.com
)-- This week, in the latest edition of Fidelity Independent Adviser’s ETF Momentum Tracker (www.fidelityadviser.com/readMe_ETF.asp), Publisher Don Dion, explores iShares MSCI Mexico. “Despite the interconnectedness of the neighboring economies, Mexican stocks have fared well so far in 2008,” Dion noted.
The recent downturn in the U.S. economy is weighing down economies across the globe, but the country feeling the fallout the strongest is just across our southern border. Mexico’s economy is heavily dependent on the U.S.: Around four-fifths of Mexico’s exports are destined for America; Mexicans working in the U.S. send enough money home to account for about 2.5% of their country’s GDP; almost half of foreign direct investment in Mexico came from the U.S. last year; and the country imported $134 billion in goods from the U.S. in 2007.
iShares MSCI Mexico, which invests in several dozen stocks from Mexico’s sole stock exchange, was down only a fraction of a percentage point year -to -date on July 18, even as the S&P 500 lost nearly 15% for the same period. Moreover, while many Mexican stocks have dropped sharply, the country has so far avoided the kind of dramatic, broad market declines that many emerging economies have experienced.
“The relative stability in Mexican markets helped iShares MSCI Mexico jump to position four on the ETF Momentum Tracker rankings table last week, after spending the previous six weeks ranked sixth,” Dion said.
Why has Mexico been spared? Dion says that, “Mexico was one of the first foreign countries to register an impact from the bursting U.S. housing bubble and subsequent credit crisis—so while many foreign markets soared in 2007, Mexican stocks produced only modest gains.”
Dion believes that, “Mexico also is cushioned from the impact of the U.S. downturn by its extensive access to commodities—especially oil.” Mexico is the third-largest supplier of oil to the U.S., and is the world’s eighth-largest crude exporter.
“Astronomical oil prices have generated huge revenues for the government,” Dion noted, “which controls the country’s oil industry.” Mexico also exports silver, copper, fruits, coffee, cotton and other major commodities—so as long as commodities prices soar, Mexico should be able to fend off the worst effects of the troubled U.S. economy.
“Mexico’s trade with Costa Rica, Chile, Honduras and the European Union has grown rapidly, helped along by a number of trade agreements,” Dion said. “Diversifying trade may be one more reason why Mexican stocks haven’t fallen as far in 2008 as might be expected,” Dion added.
The iShares MSCI Mexico portfolio is dominated by stocks in telecommunications firms such aslike cell phone provider America Movil
, basic materials firms like such as cement manufacturer C
emex, consumer-oriented firms such as Wal-Mart de Mexico, and financial services firms such aslike Grupo Financiero Banorte. About half of the fund’s assets are usually invested in its top three holdings, and recent top holding America Movil alone has long held more than a fifth of the fund’s assets.
“If Mexican markets remain somewhat aloof from the U.S. downturn, iShares MSCI Mexico’s momentum may outpace other foreign-stock ETFs,” Dion said. “But,” Dion added, “it appears unlikely that this fund will generate outsized returns anytime soon.”
ETF Momentum Tracker is a member of Fidelity Independent Adviser’s family of publications. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
About Don Dion: Don Dion is the publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors Don’s commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers. http://store.fidelityindependentadviser.com/fidinadnew.html
Mr. Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $715 million in assets for clients in 49 states and 11 countries. http://www.dionmm.com/