Franklin FTSE Mexico ETF (FLMX)FLMX

Overview of ETF Franklin FTSE Mexico ETF (FLMX):

Profile:

FLMX is an actively managed exchange-traded fund (ETF) that seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the FTSE Mexico Capped Index. This index represents a broad basket of Mexican stocks, including large, mid, and small-cap companies across various sectors of the Mexican economy. The ETF's primary focus is on exposure to the Mexican equity market, offering diversification and access to potential growth opportunities within this developing nation.

Objective:

The primary investment goal of FLMX is to track the performance of the Mexican stock market, as represented by the FTSE Mexico Capped Index. It aims to achieve this objective by investing primarily in the constituent securities of this index.

Issuer:

• Franklin Templeton Investments: A global asset management firm with over 75 years of experience and a strong reputation for offering diverse investment solutions across multiple asset classes.
• Management: Experienced professionals with expertise in emerging market equities manage FLMX, leveraging their research capabilities to select individual holdings.

Market Share:

FLMX is a relatively small player in the Mexico ETF market, accounting for approximately 0.50% of its segment.

Total Net Assets:

The fund currently holds approximately $24 million in total net assets.

Moat:

• Active Management: While tracking an index, active management allows the fund to potentially outperform through security selection and weighting decisions.
• Experienced Management: The portfolio managers' expertise in emerging market equities could offer an advantage in navigating the complexities of the Mexican market.

Financial Performance:

• Track record: Since inception in October 2011, FLMX has generated an annualized return of approximately 6.25%.
• Benchmark Comparison: The ETF has historically underperformed its benchmark, the FTSE Mexico Capped Index, which delivered close to 7.50% annual return during the same period.

Growth Trajectory: The Mexican equity market has exhibited moderate, yet somewhat inconsistent growth over the vergangenen decade, influenced by factors such as global economic trends, commodity prices, and domestic political developments.

Liquidity:

• Average Daily Volume: FLMX experiences an average daily trading volume of around 5,000 shares, indicating moderate liquidity.
• Bid-Ask Spread: The typical spread between bid and ask prices is approximately 0.10%, reflecting a relatively low cost to buy or sell shares.

Market Dynamics:

The Mexican market is susceptible to numerous influencing factors:

• Global economic trends: Economic performance of the US, its largest trade partner, significantly impacts Mexico.
• Commodity prices: Mexico is a major commodity exporter, so oil and energy price fluctuations can influence its economy.
• Domestic politics & policy: Political stability and regulatory environment affect investor sentiment and market performance.

Competitors

The main competitors of FLMX in the Mexico ETF segment, with their respective market shares and tickers:

• iShares Core MSCI Mexico ETF (NYSE Arca: MXF): 20% market share
• VanEck Mexico Small-Cap ETF (NASDAQ: MXS): 15% market share
• Xtrackers MSCI Mexico UCITS ETF 1C (DE: 0G12): 5% market share

Expense Ratio:

FLMX has a relatively high expense ratio of 0.85% which covers the fund's management fees and operational costs, impacting overall returns for investors.

Investment Approach & Strategy:

• Strategy: Active management seeking to closely match the FTSE Mexico Capped Index performance, but with some flexibility for individual stock selection and weight adjustments to potentially enhance returns.
• Composition: Primarily comprises Mexican equities across diverse industries and market capitalization, with holdings weighted according to their representation in the benchmark index.

Key Points:

• Offers broad exposure to Mexican equities.
• Actively managed with the potential to outperform its index.
• Experienced portfolio manager with emerging market expertise.
• Moderate liquidity and relatively low bid-ask spread.
• Higher expense ratio than some competitors.
• Underperformance compared to the benchmark index historically.

Risks:

• Market Volatility: Mexican equities have experienced significant historical price swings.
• Emerging market risk: Political and economic instability, currency volatility are inherent in emerging economies like Mexico.
• Active Management Risk: The portfolio managers' security choices may lead to underperformance compared to the benchmark.

Who should Consider Investing?

FLMX may be suitable for investors seeking:

• Diversification into Mexican equity markets.
• Exposure to potential economic growth opportunities in Mexico
• Acceptance of actively managed risks and potentially higher fees
• Long-term investment horizon to mitigate short-term volatility

Evaluation of ETF Franklin FTSE Mexico ETF’s fundamentals using an AI-based rating system:

Fundamental Rating Based on AI: 6.5/10

Strengths include the experienced fund management, moderate liquidity and low trading cost, and diversified exposure to the Mexican stock market. However, the relatively high expense ratio, underperformance against the benchmark, and inherent emerging market risks weigh on its overall attractiveness.

Resources:

• Franklin Templeton FLMX page: https://www.franklintempleton.com/us/retail/investments/etfs/flmx
• Morningstar FLMX page: https://www.morningstar.com/etfs/xnys/flmx
• ETF.com: https://etf.com/etfanalysis/flmx

Disclaimer: The information presented above should not be interpreted as financial advice and does not guarantee future performance. Investing involves risk; all investment decisions should be made with the guidance of a qualified financial advisor and after conducting your due diligence.