Have global investors been missing the emerging market right next door?
Since a paper in 2001 focused investors' attention on the BRICs—Brazil, Russia, India and China—those countries' stock markets, averaged out, have risen about 400 percent. Meanwhile, the exchange of the emerging market at America's doorstep has risen more than 650 percent.
And in a time of dizzying capital flows in emerging markets—draining dry on expectations of the U.S. Fed tightening policy, then sloshing in again when Ben Bernanke on Wednesday unexpectedly kept the monetary fire hose blasting—Mexico looks rock solid by comparison.
Andrew Karolyi, director of the Emerging Markets Institute at Cornell University, said such wild volatility and destabilizing speculation is in no one's interest. "Investors are not flighty by nature," he said. "They are naturally long-term oriented and seek out countries in which they can have confidence over the long term."
Mexico is engendering that confidence with both policy reforms and the country's inherent strategic advantages. It's easy to forget just how sizable the economy is: Fourteenth in the world, ahead of South Korea. Brandywine Global portfolio manager Jack McIntyre points to other enviable characteristics: A balanced government budget, a steadily growing population, a dramatically reduced deficit and relatively high interest rates.
He says that people who turn away based on media accounts of drug cartel wars are the ones who will miss out. Karolyi agrees: "Investors forget about (Mexico) at their peril."
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