One country is coming up again and again as the clear investor favorite this year, and there are ways for traders to play it, according to Bank of America. The Wall Street firm said Mexico is “the market’s darling,” with the Indice de Precios y Cotizaciones (IPC) climbing 12% this year. That outstrips the S & P 500 ‘s 8% rise over the same time period. “Investors attending our Small Talks meetings in Washington DC continue to see Mexico as a country with relatively sound fiscal and monetary policies and with balanced external accounts,” Carlos Capistran, an economist who covers Canada and Mexico at the bank, said to clients in a Tuesday note. “On top of that, Mexico is perceived as a country that will continue to benefit from nearshoring,” he said. Capistran pointed to Mexico’s economy, with recent data pointing to gross domestic product (GDP) growth in excess of 3% year over year in the first quarter. That was boosted by strong wage growth, low unemployment, as well as high remittances in the country. Meanwhile, the country is also getting a boost from the nearshoring trend, likely behind the rise in investment into machinery and equipment. “There seems to be clear bipartisan support in the US to support nearshoring or reshoring of productive assets from Asia into North America,” Capistran wrote. “Although the vast majority of these resources are moving to the US, Mexico benefits either directly or indirectly. The impact of nearshoring will likely be spread over many years.” To be sure, there are risks ahead, particularly in the near term with a Federal Reserve that is still raising interest rates. Mexico will also have to contend with any fallout from a potential recession in the U.S., as well as uncertainty around the elections in both the U.S. and Mexico in 2024. Regardless, for investors tapping into the surge in markets, there are several ways to play the rise. There are several exchange traded funds to track. For example, the iShares MSCI Mexico ETF (EWW) is up by 20% this year, far outpacing the roughly 4% climb for the broader iShares MSCI Emerging Markets ETF (EEM) over the same time period. The Mexico Fund (MXF) is up 12% in 2023. There is also the Franklin FTSE Mexico ETF (FLMX) , which is up 20% this year, as well as the iShares Latin America 40 ETF , which has some exposure and is up 6%. Beyond ETFs, there is a host of Mexican individual stocks that trade as American depositary receipts in the U.S., which give exposure to key parts of the Mexican economy and are very liquid with an active market. Cemex is the largest cement company in Mexico and a way to play construction and any building boom. Meanwhile, tourism can be accessed via three public airport authorities: Grupo Aeroportuario del Centro Norte , Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sureste . Further, the media market is available via Grupo Televisa . There are at least 11 other ADRs , ranging from finance to food to manufacturing. — CNBC’s Michael Bloom and Scott Schnipper contributed to this report.
