Mexico ETFs Outperforming

Post-election, two Mexico equity ETFs have been the market's top one-month performers.

Reviewed by: Lara Crigger
Edited by: Lara Crigger

Some analysts predicted the election of Andres Manuel Lopez Obrador, who won the Mexican presidential election earlier this month in a landslide, would tank the Mexican stock market.

However, nothing could be farther from the truth.

Since the election on July 1, Mexico's stock market has boomed, and two Mexico equity ETFs have been burning up our performance charts.

As of July 19, the $3.8 million Franklin FTSE Mexico ETF (FLMX) and the $1.2 billion iShares MSCI Mexico ETF (EWW) have risen 16.2% and 13.8% over a 30-day basis—currently the highest one-month performance of any ETF:


Sources:, FactSet. Data as of July 22, 2018.


Obrador Switches Tactics
Part of that outperformance is likely due to the more market-friendly tone that the president-elect has taken post-election.

On the campaign trail, Obrador was known for his belligerent, if somewhat vague, anti-business stances. But after the election, the president-elect toned down his rhetoric, expressing confidence in the ongoing NAFTA talks and his desire to maintain the independence of Banxico, the nation's central bank.

The day after the election, Mexico's stock market plunged, only to rebound several days later. That has kicked off a rally that has yet to abate. Since the election, the Mexican stock market is up 5%.

Slight Differences Between FLMX, EWW
FLMX's relative outperformance compared to EWW may be attributable to the fact that that FLMX does not include small caps, whereas EWW may select companies of any size. This matters because Mexico's stock market is extremely top-heavy, so smaller companies can add even more risk to a portfolio than usual.

Still, as market-cap-weighted ETFs tracking the Mexican stock market, EWW and FLMX are very similar. Though EWW has slightly more holdings, with 60 companies in its portfolio compared with FMLX's 41, 73% of the two funds' holdings overlap.

Neither EWW nor FLMX hold technology or energy companies. These sectors tend to be either privately run or owned by the government. The top three companies of both funds are the same: America Movil SAB (15% for EWW, 13% for FLMX); Fomento Economico Mexicano (10% vs. 11%, respectively); and Grupo Financiero Banorte (9% vs. 10%, respectively.)

Trading Costs Vs. Ownership Costs
When it comes to implementation, however, EWW and FLMX couldn't be more different.

EWW, which launched in 1996 in the first batch of single-country ETFs, is one of the oldest ETFs on the market. It boasts strong daily trading volumes of $204 million and tight 0.02% spreads. But with a 0.49% expense ratio, EWW isn't cheap to own long term.

FLMX, meanwhile, has cheaper buy-and-hold costs, with a price tag 0.30% lower than that of the iShares fund. But it's also newer—it launched in November 2017—and carries much higher trading costs: FLMX's spread averages around 0.18%. It also typically trades only $15,000 a day on average, so for sourcing enough shares for a larger block trade could be difficult.

These relative pros and cons are likely why EWW has brought in $69 million in new net investment dollars year-to-date, while FLMX has only brought in $1.2 million.

Contact Lara at [email protected]


Lara Crigger is a former staff writer for and ETF Report.