China’s Asian Neighbors Have the Most Attractive Stock ETFs

by: Gary Gordon

U.S. markets initially soared on the news that China would allow its currency to appreciate against world currencies. Yet the countries that will benefit the most from a yuan reevaluation are the neighbors throughout Asia.

Erroneously, there are folks who believe that China is bowing to developed world pressure prior to the G-20 summit. Anyone who has spent enough time in China as well as studying it knows that the Chinese only act in ways that will ultimately benefit China.

For instance, while the rest of the world has run from Greece, it’s China that is buying up land and forging unique business deals. Similarly, if China sees value in depegging its yuan from the U.S. dollar, it does so to strengthen relations with its Asian neighbors. (That… and the long-term recognition that the euro crisis may be a prelude to a fiat currency crisis for the U.S.!)

So it’s no surprise to see SE Asian Stock ETFs outperforming the entire field on 6/21/2010. Thailand, Taiwan, South Korea, Singapore, Malaysia… each exports goods and services to both the developed and emerging world. If these country’s respective currencies are more competitive with the yuan, these countries will have more success exporting.

Just how attractive is SE Asia? I compared a number of iShares ETFs on both current P/B for fundamentals as well as “beta” against the S&P 500 for risk. Fundamentally, SE Asia country stock ETFs tend to be better values than other emerging market funds. Risk may be a bit of a mixed bag, but nothing out of the emerging market “ordinary.”

Price-To-Book and “Beta” On Popular Emerging Market ETFs
P/B Beta
iShares MSCI South Korea (NYSEARCA:EWY) 1.86 1.63
iShares MSCI Thailand (NYSEARCA:THD) 2.20 1.36
iShares MSCI Taiwan (NYSEARCA:EWT) 2.26 1.36
iShares MSCI Malaysia (NYSEARCA:EWM) 2.97 0.86
iShares MSCI Emerging Markets (NYSEARCA:EEM) 3.19 1.22
iShares MSCI Brazil (NYSEARCA:EWZ) 3.26 1.63
iShares MSCI Mexico (NYSEARCA:EWW) 3.29 1.22
iShares MSCI South Africa (NYSEARCA:EZA) 3.39 0.96
iShares MSCI BRIC (NYSEARCA:BKF) 3.51 1.18
iShares MSCI Latin America 40 (NYSEARCA:ILF) 4.51 1.45
Click to enlarge

Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company receives advertising compensation at the ETF Expert web site from Invesco PowerShares Capital Management, LLC. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.