By November of 2009, EWM became one of my top client holdings. Moreover, during the summertime slump of 2010, I reaffirmed my commitment to buying more/maintaining exposure to this specific Southeast Asian dynamo.
In the past, I have cited a wide variety of reasons for investing in the Malaysia ETF. Reasons have included: (1) attractive valuations, (2) technical uptrends, (3) lower beta risk than the S&P 500, (4) relative strength percentile rank, (5) dividend yield, (6) diversification away from energy and materials typical of other EM investments, and (7) rankings on freedom to conduct business.
Here are three more reasons that make EWM attractive in 2011:
1. Malaysia is the third largest exporter to Japan as a percentage of GDP. Malaysia’s 7 1/2% of GDP is behind Qatar and the UAE ... that’s it. And while some might view the data as a negative (i.e., Malaysia “needs” to export goods to Japan), I see Japan needing Malaysia in the inevitable rebuilding process.
Japan imports large quantities of tropical timber from Malaysia. Japan imports roofing tiles, activated clay and bleaching earth. And the country already imports 66% of liquefied natural gas (LNG) from Malaysia. Most believe Japan will need to ramp up its LNG importing.
2. The iShares MSCI Malaysia Fund (EWM) gained ground since Japan’s earthquake. Malaysia benefits immensely from its exports to neighbors like China and Japan. One might have expected that EWM would have struggled since the earthquake/tsunami/nuclear reactor crisis began on March 11. Instead, share prices have risen roughly 1.5%.
3. Malaysia has avoided “Inflation Nation” status. Some emergers, like China and India, have 8%-10% GDP growth. Yet the remarkable pace has come at the cost of inflationary pressures and subsequent fiscal/monetary tightening. Other developed areas like Hong Kong and England may not even have the super-stellar growth that goes along with inflation. In fact, some say England is experiencing “stagflation.”
Malaysian economics may be the envy of Asia, if not the world. Unemployment is only 3.2%, but full employment hasn’t contributed to out-of-control prices. Although GDP is expected to grow at a handsome 4.8% clip in 2011, and possibly accelerate, consumer price inflation is lower than anywhere in Asia except for Taiwan.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.