It is probably not fair to call it a stealth rally because
Malaysia has been getting a decent amount of attention recently,
but the performance of the iShares MSCI Malaysia Index Fund (NYSE:
) may come as a surprise to some. In the past three months, the
$933.2 million EWM has jumped 6.8 percent. Over that time, EWM has
proven to be a better bet than comparable funds tracking China,
Indonesia and Taiwan.
In fact, EWM has outperformed the iShares FTSE China 25 Index
) by about 480 basis points since mid-May.
Adding to the good cheer surrounding EWM is the
fund's surprisingly decent dividend yield
, currently 3.72 percent. While impressive, EWM's performance is
While other marquee emerging economies are slowing, Malaysia's
second-quarter GDP increased 5.4 percent compared with growth of
4.3 percent in the year-earlier period. The impressive
second-quarter GDP growth was fueled by robust domestic demand.
Research firms are now forecasting
full-year growth of around five percent
Malaysia, like so many other developing nations, does have its
flaws. The economy, while improving, is still largely exposed to
the commodities trade. In addition, the country has had its share
of sensitive political issues in the past. To that end, investors
that want Malaysian exposure without going "all in" on the country
can consider the following ETFs:
Global X FTSE ASEAN 40 ETF (NYSE:
) The Global X FTSE ASEAN 40 ETF carries a weight of almost 28
percent to Malaysia -- the fund is one of the most heavily exposed
to the country after EWM. ASEA has benefited from that Malaysia
weight with a 7.5 percent gain in the past three months.
Perhaps the biggest selling point for this ETF is that it
tempers exposure to Malaysia, Indonesia and Thailand with an almost
39 percent weight to Singapore, a developed market. ASEA's current
price/earnings ratio is almost 14.2 while its price/book ratio is
just under two.
PowerShares S&P Emerging Markets Low Volatility Portfolio
) As the second fund to the low volatility emerging markets ETF
party, EELV is well behind the rival iShares MSCI Emerging Markets
Minimum Volatility Index Fund (NYSE:
) in terms of assets under management. There are some key
differences between the two funds, including the weights offered to
EEMV does what many multi-country emerging markets do: feature
heavy exposure to Taiwan and South Korea, two nations that are
arguably developed markets. Those two combine for about 26 percent
of EEMV's weight, while Malaysia is sixth on the fund's roster with
an allocation of 8.6 percent.
EELV is 180 degrees from EEMV at the country level. Malaysia
accounts for over 26 percent of the weight of this "low vol" play.
Not surprisingly, EELV has been the better performer over the past
EGShares Consumer Goods GEMS ETF (NYSE:
) The EGShares Consumer Goods GEMS ETF features an allocation of
almost 10.6 percent and the fund is more staples than discretionary
in composition. However, there are a couple of drawbacks to
consider. First, those that obsess over volume will not be turned
on by GGEM and its average daily turnover of less than 2,100
Second, Brazil and India combine for over 30 percent of GGEM's,
indicating that at least one of those countries needs to start
rebounding to drive the ETF higher. On the other hand, Mexico,
which is also home to a compelling consumer
, accounts for 21.3 percent of GGEM's weight.
WisdomTree Asia Local Debt ETF (NYSE:
) There are pros and cons to considering Malaysian bonds. Barclays
recently offered a tepid endorsement of Malaysian
, noting an auction of benchmark five-years earlier this week was
less-than-inspiring. The bank added that "price action may improve
because local and external positioning in MGS appears to be light,
but it will be conditioned on stability in global markets, in our
On the other hand, Malaysia's
balance sheet is strong
. Mark Mobius, executive chairman of Templeton Emerging Markets
Group, pointed out in a blog post on Malaysia that the country's
external debt-to-GDP (the amount owed to foreign creditors) is just
Mobius went on to point out the "sustained rise in agricultural
commodity prices has raised income levels in its rural communities,
and liquidity in its banking system remains high." Bonds
denominated in Malaysian ringgits account for 11.1 percent of ALD's
For more on Malaysia, click
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