After completing a year of uncertainty, the U.S. economy
entered 2012 on a more positive note. However, the high rate of
unemployment still hovers over the U.S. economy.
Meanwhile, European woes continue to dominate the headlines
and concerns over a slowdown in China still persist. Beyond these
important economies, events aren't going very well in emerging
markets either, as worries over inflation and growth are plaguing
a variety of important developing nations (
Buy These Emerging Asia ETFs to Beat China,
In this backdrop, one region on which an investor can be
cautiously optimistic is the economies of Southeast Asia and
their markets. This bloc is best represented by ASEAN, the
Association of South East Asian Nations, which is a cluster of 10
nations namely Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam (
Forget China, Buy These Emerging Market ETFs
Southeast Asia is one of the regions which continued to remain
strong even during the peak of the global financial crisis. It is
a region with growth rates better than Brazil and Russia which
makes it more attractive for investors.
Though it should be noted that in Southeast Asia, economic
activity is somewhat concentrated in four countries namely
Indonesia, Malaysia, Thailand and Singapore. It appears that the
growth caliber of this region is far greater than any other area
of the globe at this time.
Although some of these economies rely heavily on exports to
developed markets for growth, they have turned out to be great
spots for investors in this gloomy environment, as their products
seem to be in high demand despite the downturn (
Southeast Asia ETF Investing 101
The GDP growth rate forecast in this region also depicts that
these countries are not only growing at a decent rate but are
also well poised for growth going forward.
According to International Monetary Fund (IMF), Malaysia is
expected to grow at the rate of 4.4% in 2012 and 4.7% in 2013
while for Indonesia the GDP growth is expected to be at 6% for
2012 and 6.3% for 2013. Thailand's and Singapore's GDP growth
rates are expected to be at 5.5% and 3%, respectively, for 2012
and 7.5% and 3.5%, respectively, for 2013.
In the ETF space, although there is just one ETF option
available to cover five key Southeast Asia markets, ASEA, there
are a number of
that aim to provide exposure to individual countries. With that
being said, out of the ten nations of the Southeast Asia region,
we would highlight those nations that have performed the best
over the last one year.
Despite the gloomy marketplace and weakness in a number of
regions, these ETFs have held their own, delivering double-digit
gains for investors. Each of these has been briefly
iShares MSCI Malaysia Index (
Although the ETF's performance was not impressive in 2011, the
fund rebounded this year on a strong note and is expected to
continue with its strong performance for the rest of the year (
Malaysia ETF: the Perfect Emerging Market
Investment in Malaysia economy remains an intriguing choice
for investors as uncertainty surrounds most of the global
financial market. This economy is considered to be one of the
stable regions for investment in this lingering economic
For investment exposure to this stable region, investment in
the iShares MSCI Malaysia Index could be an interesting play. The
fund is linked to the MSCI Malaysia Index which is comprised of
companies that are traded primarily on the Kuala Lumpur Stock
Exchange with major focus on sectors like financials, industrials
and consumer staples.
This produces a fund which is home to 45 Malaysian stocks,
manages an AUM of $968.2 million and trades with a volume of more
than two million shares a day.
The performance of the fund has been quite impressive over the
period of one year as it delivered a return of 22.4%. This is
much better than a return of 9.75% in the year-to date
All the 45 constituents in the portfolio are large cap
companies. Among sector holdings, financials enjoys the heaviest
weighting in the fund (31.2%), followed by industrials (13.6%)
and telecommunication services (12.5%).
The fund is concentrated in the top 10 holdings assigning more
than 50% of the asset base to it. For this, the ETF charges an
expense ratio of 52 basis points annually.
iShares MSCI Singapore Index ETF (
For investors seeking a pure play in the Singapore equity
market, EWS could be an interesting pick. The product tracks the
MSCI Singapore Index which consists of stocks traded primarily on
the Singapore Stock Exchange with a major focus on sectors like
financials, industrials and telecommunication services (
Singapore ETFs for the Rise of Asian Financial
Singapore has made a name for itself by banking on the few
advantages that it has: a prime location and a well-educated
workforce. The country capitalized on these positives and turned
it into a business hub for all of Southeast Asia.
Now the country has a major port, both in terms of air and
sea, and has developed an export-driven economy with massive
industries in key sectors such as electronics and oil
The fund has gained 24.9% over a period of one year which is
especially good considering that the fund lost nearly 17.9% last
year. Clearly, the shift of investor confidence in this part of
the global market has had a very positive impact on this
EWS manages an asset base of $1,455.9 million which it invests
in a cluster of 33 stocks. It trades in volumes of more than two
million shares a day.
However, the fund is neither devoid of company specific risk
nor sector specific risk. From a sector perspective, financials
makes up 47.9% of the total exposure with double-digit allocation
also made to industrials and telecommunication.
From an individual holding perspective, the fund assigns
nearly 63% of its asset base to the top 10 holdings. Among the
top 10, 31.4% of the asset base goes towards the top three
holdings. The fund charges a fee of 52 basis points annually.
iShares MSCI Philippines Investable Market Index ETF
Investors looking for exposure in the Philippines equity space
can invest in EPHE. The fund tracks the MSCI Philippines
Investable Market Index which is a market capitalization weighted
index designed to measure the performance of equity securities in
the top 99% in market capitalization of the Philippine equity
Despite the uncertainty in the global economic environment,
the Philippines has strived to improve its economy and build a
strong platform for growth. As a result, the economy began the
year on a positive note after last year's lackluster performance
Time to Worry about the Philippines ETF?
The long-term fundamentals for the economy look good in view
of the stable political situation and the popular government that
is committed to accelerate the pace of reform in the country.
The fund provides exposure to total holdings of 41 Philippine
stocks. The fund manages an asset base of $156.4 million and
trades at a volume level of 0.1 million shares a day.
By providing exposure to 41 companies, the fund has been able
to deliver a remarkable return of 39.2% over a period of one
EPHE also appears to be quite concentrated in its top 10
holdings with 57% of the asset base going towards them. Among
individual holdings, SM Investments takes the top spot with a
share of 10.6%. For the rest of the basket, the fund does not
allocate more than 7.36%. For this, the fund charges an expense
ration of 41 basis points annually.
iShares MSCI Thailand Investable Market Index ETF
iShares MSCI Thailand Investable Market Index ETF is designed
to track the performance of the MSCI Thailand Investable Market
Index. This produces a fund which is home to 84 Thai stocks (
Is the Thailand ETF Unstoppable?
The fund has been able to amass an asset base of $636.3
million since its inception and trades at a volume level of 0.3
million shares a day. Although the ETF does not appear to be
popular, its performance has been quite remarkable. THD is the
best performing ETF in the list, delivering a robust return of
43.51% over a period of one year.
The fund, however, is guilty of concentration, with both
company-specific risk and sector-specific risk running high. The
fund assigns 57.7% of the asset base to its top 10 holdings.
Among sectors, financials, energy and materials take up a share
of 69% of the asset base while it charges an annual fee of 59
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GLBL X ASEAN 40 (ASEA): ETF Research Reports
ISHARS-MALAYSIA (EWM): ETF Research Reports
ISHARS-SINGAPOR (EWS): ETF Research Reports
MKT VEC-INDONES (IDX): ETF Research Reports
ISHRS-MSCI THAI (THD): ETF Research Reports
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