Fitzsimmons: Mexico, India & Indonesia Attractive Long Term

September 16, 2014 INSIGHT

iShares MSCI India (INDA | C-92)

Fitzsimmons sees reform expectations from Modi's election win priced into Indian stocks, and even thinks Indian stocks are vulnerable to global shocks. Still, over the long haul, he sees a positive growth story from the recent political changes. For cheap, cap-weighted exposure to Indian securities, look no further than INDA, which holds roughly 70 large and midcaps traded on the NSE and BSE. Even though the fund charges 67 basis points, it tends to trail its index by only 46 basis points over most 12-month periods, lowering overall holding costs. Roughly $10 million trades at 7 basis point spreads, meeting the needs of small investors, but block traders may have some difficulty finding bargains, not to mention a creation unit accounts for close to 4 percent of INDA's underlying constituents' volume.

iShares MSCI Mexico Capped ETF (EWW | B-95)

When discussing market opportunities, Fitzsimmons differentiates between short-term ups and downs and long-term appreciation. When we spoke to him earlier this year, he emphasized that Mexico is "a positive work in progress" but that that it won't necessarily be a smooth ride. Fitzsimmons noted that while the country is on the right long-term path for growth, it still has hard work ahead in terms of actual implementation of reform programs. He also opined that Mexico will benefit from being less dependent on accommodative U.S. monetary policy than most other emerging markets. Investors looking for a comprehensive Mexico ETF need look no further than EWW, which has a 0.50 percent expense ratio for a basket of roughly 60 Mexican companies. Access won't be an issue here: EWW trades more than $100 million most days at tight spreads averaging only 2 pennies wide.

iShares MSCI Indonesia ETF (EIDO | B-99)

Similar to his view on Mexico, Fitzsimmons remarks that Indonesia's election of Joko Widodo is a positive market outcome that will take time to culminate into implemented growth reforms. Regardless, Fitzsimmons summarizes the opportunity as "a broadly positive story for Indonesia, [that's] not going to be without its bumps." EIDO delivers a representative portfolio of more than 100 investable Indonesian companies spanning the Indonesian market-cap spectrum. With more than $10 million of EIDO shares changing hands most days and average spreads of 8 bps, the fund is also readily accessible.

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