Malaysia (EWM): Why One Country Is Bucking The Trend
15 January 2008 at 12:33 pm by Gary Gordon
I received a nice writeup in IBD (Investor’s Business Daily) this morning. The print version offered up my particulars… and I’ve received a good "ribbing" from colleagues about my head shot. (It’s 5 years old already… I’ve got more gray strands!)
The monthly ETF write-up focused on what to do if we enter a recession. I’ve given quite a few ideas in previous posts about shoring up one’s defense, from agribusiness to utilities.
Yet, this afternoon, I received another inquiry. The topic? Why has the iShares Malaysia Fund (EWM) performed so well and would I recommend it?
Let’s start with the first half of the question… why has it performed so well. The country’s economy surged 6.7% in the latest quarter numbers, exports are growing at a staggering pace, and inflation is contained. Add that to a currency that is hitting all-time highs.
And there’s more good news. The economy is expected to grow at a 5% clip for the next several years. Meanwhile, its P/E ratio price tag is a reasonable 15. The iShares Malaysia Fund (EWM) also offers a yield of 3.15%. What’s not to like?
The main thing that worries me about a speculative investment like the iShares Malaysia Fund (EWM) is the 30% weighting in financial services. If a global credit crisis spreads beyond the U.S. and the United Kingdom into Asia, how would Malaysia be able to avert it?
What’s more, nearly all of the Asian tigers except for Malaysia have been taking a severe beating. Taiwan (EWT), South Korea (EWY) and Singapore (EWS) have all seen their ETFs dip a bearish -20%. Can Malaysia escape contagion?
Now for the second part of that question… would I recommend it? I’d recommend it only to those with a high tolerance for risk and an ability to manage downside risk through the use of stop-losses.
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
