In "Blame It On Rio," I talked about the reasons why the stronger relationship between China and Brazil may be giving a boost to the MSCI Brazil Index Fund (EWZ). However, not all trading partners with China have been equally fortunate in 2009.
Since China announced an expected stimulus package on March 4, funds like the MSCI Hong Kong Index Fund (EWH) and the MSCI Singapore Index Fund (EWS) have moved dramatically higher. Yet they're still down quite a bit this year.
Singapore and Hong Kong may not be quite as vibrant as Brazil for the simple fact that Brazil represents a resource-rich emerging nation. Singapore and Hong Kong provide goods and services to mainland China, but they're not in the same position to deliver raw materials or other critical commodities.
That said, value hunters may be intrigued by the single-digit P/Es of the entire baskets for MSCI Hong Kong Index Fund (EWH) and the MSCI Singapore Index Fund (EWS). According to the Wall Street Journal Online, those P/E ratios are 9.2 and 9.7 respectively.
Still not impressed? Then what about the solid dividend yields. MSCI Hong Kong Index Fund (EWH) currently boasts a dividend yield of 7.4%, while MSCI Singapore Index Fund (EWS) is serving up nearly 10%. Are those dividends worth waiting for a rebound or not?
If dividend yields, low P/Es and a relationship to China are not enough to entice, then what about Darwin? I am referring specifically to the fact that the Institute for International Finance projected that both bank loans and private non-bank debt investment in emerging markets will decline dramatically in 2009.
If that's the case, only the nations with the strongest "balance sheets" would be likely to hang tough. We'd need to see countries with significant domestic savings and/or inconsequential country-to-country deficits.
Here, Brazil sits pretty yet again, with a strong domestic savings base, interest rates that are higher than inflation and a non-restrictive approach towards accepting foreign direct investment. But what about about Singapore?
Singapore has exceptionally robust foreign exchange reserves as well as precious little debt. Some might argue that Singapore may even benefit from finding investment opportunities in cash-strapped emerging markets around the world. (Then again, if they lost $1.5-$2 billion on Merrill, they might need to be careful about where they put that money the next time!)
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