Surprise Latin America export engine and stock juggernaut

Retail investors in the US who have been wringing their hands over the Chinese and Brazilian stock markets during the past couple of years might have looked closer to home for an emerging market to ride.

Mexico stock wins over China and Brazil.

It turns out to be Mexico, that although having its violent crime problem scaring away visitors, has been an inviting location for investors.

So far this year, the Mexican IPC Index has matched the S&P 500, gaining slightly more than eight percent while easily outpacing the Shanghai Composite and San Paolo Bovespa.

During the past two years, Mexico’s outperformance is more stunning.

“It’s pretty dramatic,” says Alec Young, international equity strategist at S&P Capital IQ. “Mexico has been crushing Brazil for a long time.”

Mexico has long benefited from the NAFTA trade pact, its huge trade relationship with the US and a steady flow of US foreign direct investment. But portfolio managers cite a litany of additional positives.

“It’s a confluence of a lot of things,” says Geoffrey Pazzanese, co-manager of the Federated InterContinental Fund which counts nine Mexican stocks in its portfolio.

Among Mexico’s fundamentals: a diversified economy, solid GDP growth, competitive labor costs and favorable inflation and unemployment rates.

This post is also available in: Spanish