EWW Stock Recent News

Shanghai CSI 300 has gone from a 52-week low to a 52-week high in only a couple of weeks. Other than China and Hong Kong, Australia is the only other international market starting the week at a 52-week high.

Political risk in Mexico has been exacerbated by the dominance of the Morena Party control and controversial constitutional reforms. Foreign direct investment (FDI) in Mexico is declining. Drug cartel violence and organized crime intrusion into the normal economy is disruptive to supply chains and public safety.

Downgraded from Buy to Sell due to further political risks from constitutional "reform" and a potential second Trump term. The Mexican market has seen a 10% weaker Peso and a 15% decline in the EWW during political uncertainty that can persist in the next 5 months. EWW's valuation appears cheap post-sell-off at 11x PE, but analysts' downgrades are likely on weaker FX and increased country risk as we head into the 2Q24 earnings.

Investors should avoid “hasty” portfolio changes based on predictions for upcoming elections after recent political surprises in countries including France triggered market losses, according to Principal Asset Management's Seema Shah.

Claudia Sheinbaum secured over 60% of the vote. The scale of the victory rattled markets as investors worry about sweeping reforms. Election sell-offs are often a buying opportunity.

The iShares MSCI Mexico ETF is in a tizzy amid the Mexican election results. Many believe Mexico's new administration will restrict the private markets. However, policy implementation and rhetoric are often different phenomena. Mexico's salient economic data is robust and scope exists for higher debt levels to stimulate GDP growth. This could benefit EWW ETF.

iShares MSCI Mexico ETF has lost close to 9% of its value on a YTD basis, underperforming global markets. Recent election results and the ruling Morena party gaining a supermajority in the house may have negative implications for Mexican stocks. Mexico's high crime and corruption rates may limit nearshoring progress, and a potential shift towards populist programs, raise concerns about the fiscal position.

Equities here in the US have gotten off to a weak start this month, with the S&P 500 down modestly over the past couple of sessions. The US-traded ETF that tracks Mexican stocks is down 8.3% month-to-date and 12.3% year-to-date.

The Mexican opportunity set is diverse, and the iShares MSCI Mexico ETF is a low-cost option to gain exposure. EWW is well-diversified across large and mid-cap segments, as well as sectors, with a strong performance on a trailing 1-year basis. Key risks remain, including higher volatility than a standard EM allocation, and a US election where US/Mexico relations are likely to be front and center, the fund remains attractive, however.

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