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Remain Bearish on Latin American Mutual Funds Amid Trump's Shaky U.S.- Mexico Relations

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President Donald Trump continues to shake certainty with impulsive tweets and executive actions. As promised during his campaign, President Trump signed an executive order to construct a wall on the US-Mexico border. On Wednesday, January 25th 2017, President Trump stated to the Department of Homeland Security, “Beginning today, the United States of America gets back control of its borders”.

President Trump is determined to having Mexico pay for the wall by imposing a 20% tariff on the country. The project is estimated to cost between $12 billion and $15 billion.

The above events have created heavy tensions between President Trump and Mexican President Enrique Pena Nieto. Both were scheduled to meet last week; however, President Pena Nieto canceled after refusing to pay for “the wall”. Today, Mexico’s foreign minister Luis Videgaray stated that further meetings with the Trump administration are not ruled out.

Among this crisis between U.S.-Mexico relations, Latin American Mutual Funds heavily weighted in Mexico are set to underperform. Deustche Latin American Fund A (SLANX - Free Report) holds a Zacks Rank #4 (Sell). Their largest holding is  in Mexican multinational beverage and retail company FEMSA (FMX - Free Report) , which they hold 8%. The fund is a Zacks Rank #4 (Sell).

FEMSA is the largest bottler of Coca-Cola (KO - Free Report) in the world by product by volume. Due to the tariff President Trump has said to impose on Mexico, FEMSA is down 4.12% since President Trump made his announcement.

Other Mutual Funds to remain skeptical of are T. Rowe Price Latin America (PRLAX - Free Report) , which has Zacks Rank #4 (Sell), and Fidelity Latin American Fund A (FLFAX - Free Report) , which also has a Zacks Rank #4 (Sell). PRLAX is weighted 18.74% in Mexico, while FLFAX is weighted 16.97% in Mexico.

Amid political uncertainty between the two nations, Latin American Mutual Funds heavily weighted in Mexico will be pressured.


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