International ETF Update: Single-Country ETFs, Investing in Mexico

by: Tom Lydon posted on: May 27, 2008 | about stocks: EWC / EWM / EWT / EWW / EWY / EWZ / GXC / LDF / RSX    
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Single-Country ETFs Need A Closer Look Before Leaping

Hot spots within financial markets across different countries may be easier to spot than you think and ETFs may help guide you.

Ron DeLegge of ETFGuide says there are certain things to keep in mind when it comes to single-country funds, including:

  • They're often sector bets. For example, Market Vectors Russia (RSX) is 42.6% allocated in energy, making it sensitive to any movements in that area.
  • They carry unique risks. Some of the countries with smaller stock markets might overweight in the largest of the country's companies, and there are political risks at times, too.
  • They can be more expensive. The average expense ratio for a single-country ETF is 0.58%, and the average for a broad international fund is 0.47%.

As of now, there are 51 ETFs tracking specific countries. Among the top-performing ETFs year-to-date are:

  • iShares MSCI Brazil (EWZ) up 20.8%
  • iShares MSCI Canada (EWC) up 10.2%
  • iShares MSCI Taiwan (EWT) up 10.6%

...and not so well:

  • SPDR S&P China (GXC) down 11.9%
  • iShares South Korea Index (EWY) down 10.5%
  • iShares MSCI Malaysia Index (EWM) of 8.8%

Whichever country you choose, do your research, and make sure it's above its trend line.

In Mexico, Foreign Investment Falls But ETF Could Get Help From Housing Boom

Could a falloff in direct foreign investment to Mexico hurt the country's ETF?

The country's economy ministry said that such investment fell 36% in the first quarter of this year, owing much to the slowdown in the United States, reports Adriana Barrera for Reuters.

For the full year, direct foreign investment is predicted to be 14% lower than it was in 2007.

On the flip side, Mexico seems to be gearing up for a housing boom, and perhaps it will help Home Depot (HD) offset any damage done by the gloomy U.S. market.

The Mexican government hopes to spur construction of 16 million new homes by 2030, reports Jeremy Schwartz for Cox News Service. Home Depot is the largest home improvement retailer in Mexico, with annual sales of more than $1 billion.

Home Depot rival Lowe's (LOW) is feeling tempted by the promise of the Mexican market as well, and they plan to open three to five stores by 2009 in the city of Monterrey.

Despite recent slowdowns, Mexico has enjoyed a largely stable economy in the last decade, with relatively low inflation and an emerging middle class.

The iShares MSCI Mexico (EWW) is one way to capture this emerging economy. It's up 9.9% year-to-date. Exposure to Mexico can also be had in a broader-based fund, such as the Latin America Discovery Fund (LDF), which is a closed-end fund. It's up 13.7% year-to-date and contains 27.5% exposure to Mexico.

This article has 3 comments! Add yours below...
Tom Lydon

Tom Lydon

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This article has 3 comments:

  •  
    cal48koho
    May 27 12:23 PM
    I lived in Mexico until recently and made good money investing in their economy but I got out last year. The plusses are a hard working friendly populace, a generally nice climate and a relatively friendly business climate. The negatives are systemic corruption and significant social turmoil and danger especially in border towns, a future of declining federal revenues with plunging export earnings from oil and nothing I can see in the wings to make up that lost revenue, an almost certain decline in tourism from high petroleum costs and a good chance of regional recession, over population and increasing food costs, class inequality and a tendency to resort to violence against authority, and declining revenue from El Norte from the illegals who are being squeezed out of the US job market. On almost all points, the S American countries, most notably Brazil look like a better investment bet IMO.
  •  
    mlyn
    May 27 06:46 PM
    Currently Mexico is an exporter of oil to the United States. Its biggest oil field, Cantarell (sp), is depleting. Most of the oil revenue disappears into the government bureaucracy. So domestically and globally, Mexico is on a cliff, unless many of its other natural resources (precious and base metals) can take up the slack. But it still needs oil.
  •  
    mlyn
    May 27 06:46 PM
    Currently Mexico is an exporter of oil to the United States. Its biggest oil field, Cantarell (sp), is depleting. Most of the oil revenue disappears into the government bureaucracy. So domestically and globally, Mexico is on a cliff, unless many of its other natural resources (precious and base metals) can take up the slack. But it still needs oil.
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