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Malaysia ETF: Don’t Overlook This Niche Play in Asia

05 November 2009 at 11:07 am by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

It’s easy to think about South Korea. Warren Buffett essentially called Korea’s POSCO the best steelmaker in the world. What’s more, South Koreans have turned a corner on everything from electronics (Samsung) to phones (LG Group) to automobiles (Hyundai).

Few investors have failed to express interest in the “China miracle.” Not only is its economy growing at a torrid 9%, but the China 25 Fund’s (FXI) 155% 5-year total return is nearly unmatched by any diversifed equity investment.

Even Asian peers like Taiwan (EWT) and Hong Kong (EWH) seem to capture a fair amount of the public’s imagination. Taiwan is a reasonably strong proxy for technology demand, while Hong Kong is often touted as a way to invest in China’s success with a bit less risk.

Yet what if I were to tell you that an emerging market is showing significantly stronger gains that the S&P 500, but with less volatility (i.e. risk)? In all likelihood, then, we’d be talking about the iShares MSCI Malaysia Fund (EWM).

RiskGrades.com currently assigns a standardized risk measure of 90 to EWM, while assigning a risk rating of 93 to the S&P 500 SPDR Trust (SPY). Similarly, WSJ.com pegs the beta for iShares MSCI Malaysia Fund (EWM) at 0.82 whereas the S&P 500’s beta is 1.0.

One of the unique features of EWM over competing emerging market ETFs is its diversification. Brazil (EWZ) tends to move in lock-step with Global Materials (MXI), while Russia (RSX) depends 50% on oil/gas and energy company performance. On the flip side, EWM depends more on cyclical economic trends through consumer discretionary spending, industrials, consumer staples and financials.

In other words, it may just be a reasonable way to diversify your emerging market holdings that are heavy into natural resources. Of course, the superior 2-year “bear-to-cyclical-bull” results give still another favorable perspective for the iShares MSCI Malaysia Fund (EWM).

EWM Over 2 Year Period

Need a bit more background on Malaysia? Review my early August feature, “Malaysia ETF Offers A Different Slice of the Emerging Market Pie.”

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. The content does not represent investment advice, nor are the securities discussed suitable for every investor. 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. 

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