It sure feels good when reported results, from either a company
or a country, meet or exceed expectations. With much of the world
struggling to stimulate growth, such positive news is rare. But the
Malaysian economy has given emerging market investors something to
smile about.
[caption id="attachment_71033" align="alignright" width="300"
caption="Malaysian capital Kuala Lumpur"]
[/caption]
Economists had forecast that the Malaysian economy would show
GDP growth of 4.6% for the three-month period ended June 30.
Malaysia's central bank announced a much better
than expected 5.4%
. It also upwardly revised GDP growth for the first quarter, from
4.7% to 4.9%. Growth for the first half of the year remained at
5.1%, compared with the same period a year ago.
Fueling the Malaysian economy growth was private and public
investment, up 24.6% and 28.9%, respectively. The central bank
reported that private consumption was up 8.8% and public
consumption 9.4%.
Approximately 60% of
the Malaysian economy is tied to exports
, which continue to grow despite the global slowdown. Exports
increased 3.95% in the second quarter, compared with 4.4% in the
first quarter. The central bank is holding its GDP target for 2012
at between 4% and 5%, but it did say it expected that number to
land closer to 5%.
The only ETF dedicated to Malaysia, the iShares MSCI Malaysia
Index Fund (
EWM
,
quote
), reacted positively to the news but failed to hold the gains. In
the chart below, I've circled the trading day, with shares of EWM
trading up to $14.72 per share but closing at $14.64, the exact
same close as the day before.
The one-year chart below shows a very nice upward climb for EWM
shares despite a fair amount of volatility. Unfortunately, there
does appear to be some resistance at $14.75. Nonetheless, the
outlook for the Malaysian economy and the ETF is better than that
for many other emerging markets.
The five-year chart below also looks good. Even with some
short-term resistance at $14.75, the ETF is trading in a channel
that has narrowed since the bottom that occurred for most equity
markets in March 2009. Given the positive fundamental outlook and
technical observation, I expect Malaysia to continue to perform
better than most of its peers.
Last, a comparison between EWM and the S&P 500 succinctly
tells the story of emerging and frontier markets. While investors
holding U.S.-oriented ETFs, mutual funds and stocks are celebrating
that they have almost recovered their losses from the stock
market sell-off that extended from October 2008 through
March 2009, investors in EWM have not only recovered losses but
exceeded the highs attained in late 2007 and early 2008.
Longer-term expectations for emerging and frontier markets are for
this type of activity to continue, with developing countries
leading the way and developed countries following.
