World's Worst Currency Sparking Outflows From Mexico's Stock ETF

  • Mexico ETF loses half of its total assets in past 12 months
  • Peso posts biggest decline among major currencies in 2016

Traders are pulling money from Mexico’s biggest exchange-traded stock fund at the fastest pace in seven months, tracking the tumble in the nation’s currency.

The iShares MSCI Mexico Capped ETF has posted $118.9 million in outflows so far in 2016, the most among similar funds from major emerging markets after Taiwan, according to data compiled by Bloomberg. While the Latin American nation’s benchmark IPC equity gauge has climbed 1.5 percent in the span, it’s slumped 4.8 percent when measured in dollars. The peso has slid 6.3 percent this year, the most among major currencies.

Mexico’s $1.1 billion BlackRock Inc. ETF has lost half of its total assets in the past year amid concern that global growth was cooling down as higher U.S. rates curb the appeal of securities from developing nations. The ETF slipped 0.6 percent to $48.12 at 3:25 p.m. in New York, extending this year’s slump to 3.4 percent.

The pace of outflows has “surprised me,” said Aldo Miranda, an equity sales trader at CI Casa de Bolsa SA in Mexico City. “In terms of macroeconomics, Mexico’s not that great, but it’s not that bad.”

Mexico’s economy expanded more than forecast for the fourth consecutive quarter in the final three months of the year as domestic consumption rebounded amid record low inflation. Latin America’s second-biggest economy is expected to grow 2.8 percent this year, while Brazil is in deepest recession in a century, according to analysts surveyed by Bloomberg. Still, the $1.7 billion iShares MSCI Brazil Capped ETF has only registered $82.5 million in outflows this year.

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