International ETF Update: Japan, Russia, Switzerland

by: Tom Lydon posted on: June 06, 2008 | about stocks: EWJ / EWL / FXF / ITF / RSX

Japanese Economy and ETFs Land of the Rising Sun?

The land of the rising sun could be in a great position as the country may be able to stave off a recession with domestic demand, helping its ETFs and market strengthen.

Wages rose in Japan for the fourth straight month, the best in two years, while residential investment was up in the first quarter, reports Keiko Ujikane for Bloomberg. A slowdown in exports to the U.S., their largest overseas market, and yen appreciation may not be enough to threaten the well-being of the Japanese islands.

Japan's housing starts are on the mend after a four-decade low last year. Full-time employment has been on the rise and is replacing low-paid, part-time workers. Overall the economy should grow 1.7% in 2008, followed by a 1.5% rise in 2009. iShares MSCI Japan Index (EWJ), up 3.8% year-to-date, could see a turn around, along with iShares S&P/Topix 150 (ITF), up 4.9%. Heavyweights Toyota (TM), Honda (HMC) and Mitsubishi (MSBHY) are among the companies holding assets in both ETFs.

Japanetfs

Russian Expansion Extends to ETF

A lot can happen in a decade, as fashions change, music shifts and countries such as Russia expand, sending related investments and ETFs up.

Although the U.S. is hurting from high oil prices, Russia is celebrating, as soaring oil prices, mixed with a global demand for raw materials have grown Russia's middle class and put the country into a 10-year economic boom, reports Trang Ho for Investor's Business Daily.

Economists are forecasting a 6.5% GDP growth for 2008, while the government is anticipating 7.6%. GDP expanded 7.6% in 2007 to $1.7 trillion. Russia is in the midst of a 10-year economic expansion and could be one of the world's top economies by 2020. The middle class continues to expand, and personal incomes have risen more than 12% per year, giving consumers more disposable income.

Market Vectors Russia (RSX) is around one-year old and this 36-stock ETF has returned 42% over the past year, and 7.3% year-to-date. Energy is given 43% of assets, industrial materials at 27%, and telecom at 13%.

Russiachart

For full disclosure, some of Tom Lydon's clients own RSX.

Swiss Inflation Healthy for ETF?

Swiss inflation is appearing higher than the Alps, so will the Swiss ETF, iShares MSCI Switzerland Index (EWL), be able to tread water?

Economists forecast the recent spike in inflation for the Swiss is the fastest it has been in 15 years, thanks to high energy costs, reports Simone Meier and Joshua Gallu for Bloomberg.

Consumer prices for the Swiss ran up 2.9% from the year before, with a forecasted inflation of 2.4%, according to a Bloomberg study. Swiss economists are working hard to shore up problems, as the National Bank has put interest rates on hold, but if problems arise, they will be forced to push the benchmark higher. And crude oil prices have risen 33% this year - pressure has been added to companies to pass on the higher costs to help earnings.

EWL gives 30.7% to healthcare, and 25.0% to consumer goods, while financial services get 22.8%.