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Morningstar Says Reforms in Mexico Should Lead to "Healthy Growth"

06 May, 2013

Savvy members of the global investment community have taken notice of recent reforms taking place in Mexico real estate. Ultimately,these reforms aim to open up the nation’s markets and increase its tax revenues,while boosting market performance. In addition,Standard & Poor’s upgraded the outlook for Mexico’s sovereign credit rating in early March,moving it from stable to positive,which could indicate an additional upswing over the next year and a half or so.

“These moves should help set the foundation for healthy growth,” writes Morningstar. “Some of this appreciation has been driven by strong foreign investment inflows into Mexico.”

In fact,according to the Mexican central bank,foreign investors dumped more than $80 billion into stocks and bonds this February,marking it a record month for the nation’s market and surpassing nearly five times the inflows to Brazilian securities over the same period.

“One of the ways to gain direct,diversified exposure to Mexican stocks is via iShares MSCI Mexico Capped (EWW),” writes Morningstar. “It can be used to gain exposure to Latin America’s growing middle class,who are likely to benefit from the planned reforms.”

In addition,EWW holds a variety of highly profitable firms that boast significant competitive advantages; including America Movil,Coca-Cola bottler Femsa and building materials company Cemex,among others.

“Looking ahead,Peña Nieto has laid out a reform program that… will be a positive for Mexico’s economy,” writes Morningstar. “Mexico’s economy has been on a steady growth path,driven by sound macroeconomic policy and growing exports. Over the past few years,Mexico’s economy and public finances have been on stable ground,with the country seeing steady job growth and mild inflation.”

Finally,the recovering U.S. economy,as well as a major influx of manufacturing business that was previously snatched up by China,combined with Mexico’s young and eager population,are all viewed as near and medium-term drivers for continued growth in the nation’s economy.

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