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Battered Leveraged Mexico ETF Keeps Luring Traders

ETF Professor

Amid intensifying political volatility, Mexican stocks were battered in November, but some traders are remained devoted to the lone leveraged exchange traded fund tracking stocks in Latin America's second-largest economy.

What Happened

The Direxion Daily MSCI Mexico Bull 3X Shares (NYSEARCA:MEXX) slid 15.40 percent, making it the third-worst performer among Direxion's suite of leveraged bullish ETFs. MEXX looks to deliver triple the daily returns of the MSCI Mexico IMI 25/50 Index (M1MX5IM).

Newly elected President Andres Manuel Lopez Obrador, or AMLO as he is commonly called, was sworn into office last Saturday. AMLO is viewed as a political outsider in Mexico as he does not represent one of the two parties that have dominated Mexico's presidency since the early 20th century.

Why It's Important

AMLO is a populist and has struck a “man of the people” tone with Mexican citizens. Keeping with that theme, he will not be living at the presidential palace, but AMLO is not without his flaws.

He recently “upset markets by canceling a huge $13 billion airport infrastructure project here that was already under way,” reports NPR. “And he recently angered supporters by reversing a promise to remove the military from crime fighting.”

Economic growth in Mexico is expected to be stable next year, but the country is one of six in Latin America Fitch Ratings has on Negative Outlook/Watch. Fitch rates Mexican sovereign debt BBB+.

“In Mexico, policy uncertainty has risen with the President-elect, particularly with regard to energy sector reform and the decision to cancel a major airport infrastructure project in Mexico City,” said the ratings agency.

What's Next

Even with the declines in Mexican stocks and potential headwinds looming for the economy there, traders remained devoted to MEXX in November. Last month, the leveraged Mexico ETF averaged daily inflows of nearly $277,000, according to Direxion data.

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