ETF Expert

Indonesia appears to have quite a lot going for it. The multi-island nation has a balanced budget, a trade surplus, attractive interest rates for carry trade investors, 3.5% GDP growth for 2009 and future GDP growth expectations that are rivaled only by China and India.

Richard Shaw makes the point that projections for Indonesia exceed Latin America's largest economy, Brazil. Still, Mr. Shaw expressed reservations about the Market Vector's Indonesia Fund (IDX) having limited trading liquidity.

(Note: I expressed the same concern on June 10 in Indonesia ETF up more than 100%! However, a scarier prospect is the 33% weighting in the financial sector.)

Worries aside, investors may indeed be warming up to the small country ETF from an emerging region. In the initial 4 months that Market Vectors Indonesia (IDX) traded, daily volume hovered around 15,000 shares. In May, it rose to 30,000 shares. In June, daily volume climbed to 45,000 shares.

Another small country ETF is Singapore. So I thought that I might revisit the iShares MSCI Singapore Fund (EWS).

Bespoke put up an interesting graphic on current P/E ratios. I was somewhat surprised to see Singapore coming in at the low end of the P/E range with a current P/E of 12.

Of course, it's very difficult to use P/Es in the wake of a systemic financial breakdown; they may (or may not) have been rendered somewhat meaningless in the immediate term. Nevertheless, with SE Asian countries like South Korea and China both at P/Es of 29, might there be some value in paying for the potential growth in Singapore's dynamic economy?

It is true that Singapore analysts cut forecasts for its economy in 2009 to an anticipated contraction of -6.5%. That's pretty darn grim.

Yet by the same token, the sane analysts who expect a deeper 2009 recession are calling for a sharper 2010 recovery. They boosted their forecast for 2010 growth to a 4.2 percent expansion, up from 3.3%.

If stock assets purportedly look out 6 months or longer… bingo. Singapore 2010 is right around the corner, with growth potential far greater than many of its SE Asia peers.

Unlike Indonesia fund(s), the iShares MSCI Singapore Fund (EWS) boasts millions of shares in trading volume. It offers an approximate 6% yield. And this is a country with strong trading ties with China.

Once again, though… the financials segment plays too large a role. With nearly 50% of this index in financial companies, a diversified investor may wish to think about a non-ETF alternative for capturing Singapore's potential for a rapid recovery.

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "LIVE", via podcast or on your iPod.

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 Adviser 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.