Malaysian ETF on a Hot Streak - Careful Not to Get Burned

| About: iShares MSCI (EWM)

The Malaysian exchange-traded fund (NYSEARCA:EWM) has been on a hot streak rising 24 per cent in dollar terms on the back of an appreciating currency and a prolonged palm oil boom. Foreign investors have noticed the opportunity pouring $438m into Malaysia funds and ETFs this year, according to Citigroup report.

But the Malyasian market and ETF is dominated by a few state-owned firms centered on banks, utilities and resources leading to concentrated risk in a rather shallow market. Share prices which previously were attractive due to the Malaysian market underperming its peers for a couple of years straight now look fully priced or at a premium.

The government predicts that gross domestic product this year will reach 6 per cent, although some economists have forecast that growth might slow later this year amid soft­ening global demand for electronics, Malaysia’s biggest industry.

EWM 1-yr chart