Shares of the iShares MSCI Malaysia Index Fund (NYSE:
) are soaring 5.8 percent Monday and are near all-time highs as
traders in the U.S. digested news of Prime Minister Najib Razak's
victory in elections held in the Asian nation over the weekend.
Razak's National Front coalition captured 127 of Malaysia's 222
parliamentary seats. The party has ruled Malaysia for close to
The FTSE Bursa Malaysia KLCI Index, the country's benchmark
equity index, rose 3.1 percent to 1,747.85, though traded higher
by as much as 7.8 percent during Monday's Asian session. On the
election-induced relief rally, financial services shares jumped
as Malayan Banking touched an intraday record high while CIMB
Group, Malaysia's second-largest bank, surged 10 percent.
That is good news for EWM because those are the ETF's two
largest holdings, combining for over 18 percent of the $963.3
million fund's weight. Coincidentally, CIMB's chief executive
officer is Nazir Razak. Yes, that Razak. Nazir is Najib's
Analysts and traders that closely follow Malaysia are not
likely to soon forget that Najib campaigned, in part, on promises
to reduce corruption in Southeast Asia's
Trouble Ahead In post-election comments, Prime Minister Razak
emphasized "This election was true, fair and transparent" while
imploring his vanquished opponent, Anwar Ibrahim, to accept "the
result with an open heart," NPR reported.
For his part, Ibrahim is not taking the result lightly,
calling it the worst in Malaysia's history. Ibrahim has also
hurled accusations of fraud, adding there were "specific
incidents" of voter fraud involving foreign nationals,
according to the BBC
. There are rumors in Malaysia that foreign nationals were given
documents to allow them to vote and some speculation some voters
were allowed to vote multiple times.
With protests scheduled to take place in Kuala Lumpur
Wednesday, the ebullience surrounding EWM could be short-lived.
The lone Malaysia-specific ETF has already
proven vulnerable to political concerns this
Prior to the start of trading Monday, EWM was only up 2.8
percent year-to-date, putting it well off the pace set by
comparable Indonesia, Philippines and Thailand
. Some traders in the region have already speculated Monday's
surge in Malaysian equities was no more than an overdone relief
rally as investors were happy merely to see the end of the
election. That much may be evident by the FTSE Burse Malaysia
KCLI Index, which finished well off its highs of the day
Alternatives Investors looking for Malaysia exposure via ETFs
without the potential vulnerability faced by EWM should fraud
allegations and protests gain steam have several compelling
options. The Global X FTSE ASEAN 40 ETF (NYSE:
) allocates 23.1 percent of its weight to Malaysia. ASEA also
somewhat tempers emerging markets volatility through a 37.5
percent weight to allocation to Singapore while also featuring a
combined 36 percent weight to Indonesia and Thailand, two of the
better emerging markets this year.
Malaysia is one of the lower beta developing markets. As such
the country pops up in some of the low volatility emerging
markets ETFs, receiving an allocation of 11.6 percent in the
EGShares Low Volatility Emerging Markets Dividend (NYSE:
) and 8.4 percent in the almost $2 billion iShares MSCI Emerging
Markets Minimum Volatility Index Fund (NYSE:
The EGShares Beyond BRICs ETF (NYSE:
), which debuted last August, allocates 14.5 percent to Malaysia.
That ETF is up nearly four percent in the past month.
For more on ETFs, click
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