Shares of the iShares MSCI Mexico Capped Investable Market
Index Fund (NYSE:
) are trading higher by nearly half a percent today after Banco
de Mexico, that country's central bank, surprisingly pared its
overnight lending rate by 50 basis points to a record low of four
It is the first time in three and a half years that the
central bank has pared rates, a move that was expected by just
seven of 25 economists surveyed by Bloomberg
Benign inflation served as one catalyst for Banco de Mexico to
pare rates. Inflation in Latin America's second-largest economy
was 3.55 percent last month, up from 3.25 percent in January
though still within the central bank's desired target range of
two percent to four percent, Bloomberg reported.
Slowing economic growth is perhaps the other primary catalyst
behind the rate as Mexico's GDP growth is forecast to be 3.5
percent this year, though that is expected to be on par with
Brazil, Latin America's largest economy.
Still, EWW has been a leader among major Latin America
over the past year and year-to-date. In the past 12 months while
the iShares S&P Latin America 40 Index Fund (NYSE:
) has slid 7.6 percent, EWW has surged 19.6. Over the same time,
EWW has been the top-performing country-specific ETF tracking a
Latin American nation.
government labor reforms
and the pilfering of some manufacturing jobs from China, EWW has
been a solid though not spectacular performer in 2013. The ETF
has outperformed ILF and the comparable Colombia and Peru ETFs,
though EWW is currently lagging the iShares MSCI Brazil Capped
Index Fund (NYSE:
To be fair, EWZ has only started outpacing EWW this week by
a resurgence in Brazil's state-run oil giant
EWW's uptrend does have the ETF trading at a premium relative
to the broader emerging markets universe. The fund currently has
a P/E ratio of 26.34 and a price-to-book ratio of 3.83,
according to iShares data
. By comparison, the iShares MSCI Emerging Markets Index Fund
) has a P/E below 18.4 and a price-to-book ratio just over
Departing from equities, news of the rate cut is not having
much of an impact on bond ETFs with heavy exposure to
peso-denominated issues. The peso gained more than eight percent
against the greenback last year and is up nearly one percent
year-to-date, underscoring why some investors,
including PIMCO's Bill Gross
favor peso-denominated bonds.
Today, however, the Market Vectors LatAm Aggregate Bond ET
), which has a14.5 percent weight to bonds denominated pesos, is
just slightly lower. Same goes for the Emerging Markets Local
Currency Bond ETF (NYSE:
), which features a 10 percent weight to Mexico.
For more on Mexico, click
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