The Mexico Fund: Emerging Market Stability and Growth For Long-Term Investors

Wednesday, Nov 14 2018 by


The Mexico Fund: Emerging Market Stability and Growth For Long-Term Investors

Since the summer trading period ended, volatility in the stock market has been on the rise.  Global trade wars and hawkish interest rate policy from the Federal Reserve has weighed on sentiment.  This has produced significant declines in the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite Index.  For investors, this creates added incentive to look at emerging markets as a source of growth in the quarters ahead.  

Opportunities in these types of environments can often be found when isolating well-positioned assets in economics which are shielded from the turmoil in the broader financial market.  One name which has risen to prominence as a market leader is the Mexico Fund (NYSE:MXF), which is currently trading at attractive valuations relative to its historical averages. The Mexico Fund seeks long-term capital appreciation through investment in securities, primarily equity, listed in Mexico.  On a YTD basis, the Mexico Fund has outperformed its asset category while raising its quarterly distributions for shareholders.

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The Mexico Fund is a highly-diversified instrument with assets allocated across seven important industry sectors.  Industrials make up the majority of the fund (at 19.41%), while Basic Materials (17.80%), Consumer Goods (16.10%), Telecommunications (15.61%), Financials (12.94%), Consumer Services (10.33%), and Utilities (2.65%) comprise the remainder.  This impressive level of asset diversification helps investors protect against potential market declines in any individual industry.

The fund’s individual stock holdings are well-positioned to drive growth in ways that are largely unmatched in most developed market assets.   Telecommunications company America Movil SAB de CV (OTCMKTS:AMXVF) represents its largest holding (at 12.76% of the fund). Wal-mart de Mexico SAB de CV (OTCMKTS:WMMVF) is the fund’s second-largest holding (at 7.79%), and multinational beverage and retail company Fomento Economico Mexicano SAB de CV (OTCMKTS:FMXUF) is the fund’s third largest holding (at 7.52%).  

Banking and financial services holding company Grupo Financiero Banorte SAB de CV (OTCMKTS:GBOOF) takes the fourth position in the fund (at 6.52%), and Grupo Mexico S.A. de C.V. (OTCMKTS: GMBXF) takes the fifth position in the fund (at 6.10%). This diverse group of stocks acts in combination to help create a strong portfolio outlook for long-term investors.

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4 Posts on this Thread show/hide all

aflash 14th Nov '18 1 of 4


You may be right.

However all emerging markets are subject to the 'Carry trade'.

U.S. rates are rising therefore dollars are being repatriated and U.S. tax cuts brings offshore profits back from emerging markets.

Maybe Mexico is less affected by capital flows and more by American growth. If so that fails to explain why the MXF (Mexico Fund) has just crashed.

I have bought and sold it many times, starting with their crisis in 1994.
It has taken off twice towards 40$, reaching 45$ in 2007 and 37$ in 2013.
At the moment it will encounter Resistance at 15,20$ ish.
Last year I sold some at 17,77$ and have just bought some more.

On the fundamental side it is tied to the U.S. economy. The new trade pact where Mexican car workers either have to be paid more or the parts have to be made in Canada or the USA does not translate to profits for Mexican companies. It is also tied to the Oil price and I have read that Pemex is not too efficient. You do not talk about any of this. The remittances from Mexican workers in the USA and Canada and the possible increase in car workers' salaries will help the Consumer Goods and Services and Telecommunications that you do write about.

On the country ETF side, however, I more interested in EWY (Korea) and EWZ (Brazil).

EWY (Korea) was sold last year at 68$ after it dropped from 78$ and I am about to buy again around 57$

On the fundamental side the unification of the two Koreas is exciting if it happens. The geographical position of the North and its resources and the Know-how of the South would be a great combination.

EWZ (Brazil)'s chart has formed a double bottom and I have an unfilled order waiting.

Much will depend on the ability of the new president to work with the Peoples' party that dominates the lower house and to get pension reform through.

This is another ETF held many years. I sold some last year about the price it is now and in 2016 for a loss.

From notes I sold some TUR (Turkey) for a profit last year at 44,50$.

This year it has bounced from its Low of 19$ in August.

Anyone have any confidence in the future there?

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Taff6 15th Nov '18 2 of 4

In reply to post #419074

FYI only, If your interested in Brazil, it's not a recommendation or anything, however JPM Brazil appear to be on a discount to NAV of 18.2%


Haven't checked this data out to see if correct. Why are you looking at Brazil out of interest? 

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aflash 15th Nov '18 3 of 4

Tks Taff6,

You can be relied on to provide an interesting angle. Got on to JPB (J P Morgan Brazil) right away. It follows the same trajectory as EWZ (Brazil ETF) but has some advantages for me.

Brazil had one of the fastest growing economies in the emerging world until the recent problems of inflation, corruption and politicial deadlock. Nevertheless it remains a force to be reckoned with in South America. I go once or twice a year to Argentina and Chile for work and Brazilian tourists are everywhere. Forget Argentina except for short term trades. Chile is stable and growing but probably fully valued.

As a p.s. to yesterday's ETF comment the MXF (Mexico) ETF is not liquid - 700 trades today whereas EWZ (Brazil) has already turned over 4 703 000.

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JMLDutch 15th Nov '18 4 of 4

Seems interesting. However, the long term performance is a major turn-off! This fund is trading below where it was in 1995(!). Perhaps still valid as a trade, but as a long-term holding it doesn't seem attractive to me.

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