Mexico May Be a Standout in Emerging Markets

Originally published on MarketWatch, April 27, 2012.

The Mexican economy has fared well and may continue to outperform most emerging markets over the long term, according to John O’Donnell, chief knowledge officer for Online Trading Academy.

Mexico could “take over the manufacturing prowess that China currently holds,” with Mexico’s wages now only 42% higher than China’s, compared with 250% higher 10 years ago, and given Mexico’s close proximity to the U.S.,” he said.

As the Mexican wage rate trends lower in comparison to China, Mexico will attract more manufacturing jobs. That will grow its middle class and its economy, he said.

And a good opportunity to play Mexico’s ongoing domestic growth story would be through the Global X Mexico Small Cap ETF (MEXS), said O’Donnell.

It’s the first ETF to target Mexican small-cap companies, he said. “With only 28 holdings and 72% of the holdings heavily weighted towards consumer discretionaries, industrials and consumer staples, this ETF offers a targeted approach to the country’s local economy,” he said.

Still, until more volume moves into the MEXS, O’Donnell said he would opt to invest in iShares MSCI Mexico Investable Market Index Fund (EWW).

“The fund was launched over many years ago and uses a mix of small-, mid- and large-cap stocks. More importantly, the average volume is over 2 million,” he said.

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