International ETF Update: Japan, South Africa, Turkey

Japan's ETF Shaky As Economy And Country Are Rattled

The near future of Japan's economy and its related ETF are flashing mixed signals.

The Organization for Economic Cooperation and Development states that Japan's economy is looking better as slow domestic demand creeps higher, thanks to increasing wages and a jump in housing starts, reports Jesse Emspak for Investor's Business Daily.

On the other side of the coin, Lord Abbett & Co.'s Senior Economist Milton Ezrati says that Japan's co-dependence on exports and the high savings rate will hurt domestic demand and shows no sign of transformation.

iShares MSCI Japan (EWJ) has supported this theory slightly, as it's down 1.4% year-to-date. While the year-to-date numbers aren't so hot, the fund has actually gone up 13.6% in the last three months.

Meanwhile, the latest earthquake that rattled northern Japan is still giving rescuers a hard time, with as many as 470 aftershocks stifling rescue efforts. The earthquake was the same size as the Kobe quake in January 1995, reports Junji Kurokawa for the Associated Press. Last month's quake in the Sichuan province of China was a magnitude 7.8.

The chance of re-building efforts may give the economy a boost in the interim.

Among the many other Japan-related ETFs include:

• PowerShares FTSE RAFI Japan Portfolio (PJO), down 6.6% year-to-date
• WisdomTree Japan Small Cap Dividend Fund (DFJ), down 0.3% year-to-date

 

Tough Times May Fall On South Africa And ETF As Interest Rates Rise

South Africa may be in for hard times ahead, news that may affect its ETF. The recent run of solid growth may get stunted as higher interest rates are looming, coupled with rising food and fuel costs.

A recent dip in the country's growth was pinned to the energy constraints due to the power outages which forced mines and industries to shut down, AFP reports. First quarter growth measured 2.1% for the year, down from 5.3% registered in the last quarter of 2007.

The recent .50% increase of the key repo rate brought the total to 12%, halting economic growth and causing consumers to cut back. Banks are also going to increase mortgage rates to 15.5%.

Since 2006, interest rates have gone up nine times by a cumulative 4.5%. Ouch!

Record high prices that show no signs of slowing and growing household debt (it's 78% of disposable income in the country) could hurt the iShares MSCI South Africa Index (EZA).

The fund had been enjoying a nice stretch for a good portion of this year, thanks to record gold and platinum prices. But year-to-date, it's now down 8.9%.

Turkish ETF Here for Economic Reforms

The country of Turkey is getting a make-over and with the government implementing major economic reforms, the ETF can stand to benefit. Turkey has not gotten its membership into the European Union, but is hopeful as accelerated privatization is a major goal, reports KG Narandranath for Economic Times.

Reforms are focused on areas like banking, agriculture, social security, energy and telecommunication. iShares MSCI Turkey Investable Market Index (TUR) launched in April and top holdings include financial services and telecommunication companies. The pro-business Justice and Development Party or AKP, is making promises in areas of labor market and taxation.

Over the past five years, the Turkish economy has grown 7% on average, with a gross national income of $663 billion for 2007. It is rated the 17th largest economy in the world, and sixth in Europe with a GDP of $400 billion in 2007.