The iShares MSCI Malaysia Index (NYSEARCA:EWM) was one of the few single-country funds up year to date but concerns about politics seems to have driven it into negative territory. In the last two weeks it's down 6.5%.
It seems that over the past year investors, especially foreign investors, have finally begun to appreciate that Malaysia offers many of the attributes of its southern neighbor. Although palm oil and other commodities are an important part of the Malaysian story, investors have begun to recognize that its economy is well diversified with 43% of GDP attributed to the services sector while agriculture represents only 8%.
It also has attractive demographics with 32% of its population under the age of 15 - more than double the proportion in Japan. Economic growth last year was a respectable 6% and the country has moved solidly into the middle income circle of countries with a per capita income of $12,900. All of these favorable trends are finally being recognized by global investors and have also given the country the strength to improve political and economic relations with Singapore.
The MSCI iShares Malaysian exchange-traded fund is a basket of leading Malaysian companies and has an annual expense ratio of only 0.54%. Financial companies account for 33% of the fund’s exposure, industrial firms are at 18% and consumer staples and discretionary companies together make up an additional 29%.