Steven Towns

iShares Asia Region ETFs Weekly and YTD Returns

Thanks Frank!

The U.S. has been outperforming NE Asia, esp. since the Feb. sell-off -- except recently in the case of S. Korea. Note U.S. outperformance of China (referring to FXI, as surveyed above) is misleading, because the main Chinese benchmarks are up around 70% last count, even with the latest drop. FXI is nowhere near that in '07.

One idea why the U.S. is outperforming Taiwan, Hong Kong and Japan perhaps relates to the correlation and interdependence of the three, limiting capital flows on concerns of a U.S. slowdown.

Other reasons relate to valuation and sentiment, since Hong Kong already had a nice run last year and investors/traders appear quick to lock in profits as they do in Japan.

There's also political risk and more direct spillover from items related to China as these countries are closer in proximity and have the deepest economic ties. For example, following the late Feb. sell-off, Japanese stocks fell more than any other country, even China!

Also and most interesting is the fact that Asian countries keep buying up U.S. assets. Japanese in particular are net buyers of overseas equities, whereas they are frequently net sellers of domestic equities.

iShares Asia Region ETFs Weekly and YTD Returns

Hi Michael,

I don't follow CEFs as closely as I do the iShares country-based funds. However, I am aware of the big gains last week for The Korea Fund (KF) and The Korean Equity Fund (KEF). In fact, CEFs paced advancers among Japan funds as well. I now see JOF is trading at a premium, whereas until recently, it was trading at a discount and if I remember correctly, it wasn't too long ago at double-digits.

I believe the gains in the CEFs have a lot to do w/ two main points: (1) discount/premium -- obviously in this case, the discount is creating buy interest, shortening the market-NAV gap; (2) composition of funds -- but in the case of S. Korea, you really don't see much difference in the names and %s of the top-10 and 25 positions, but there is some, which could explain. Also, EWY is shown as having 91 holdings, versus 62 for KF and 33 for KEF. This is per Morningstar, but note the last updates for each were scattered with 4/30/07 for EWY and 10/31/06 for KEF.

Despite last week's gains, I'm still seeing both Korean CEFs trade at discounts, -5.8% for KF and -9.3% for KEF, according to Morningstar.

A recent article by Mark Hulbert focused on the N. Korean nuclear threat and its impact on valuation.

In general, S. Korean stocks have more attractive valuations than those in China, Japan and assumingly than those in high flying markets in SE Asia.

Interestingly, the S. Korean won has strengthened against the dollar, while the yen has been weakening, which negatively impacts the competitiveness and financials of export-oriented South Korean companies -- however, the stronger won is a plus for American investors.

Lastly, put up a ytd chart of EWY, KF and KEF and you'll see EWY is clearly outperforming. It is also has more liquidity and lower fees.

The Rise of Samsung and Slipping of Sony (SNE, EWY)

Booya Jim on Sony in yesterday's Mad Money: "Sony is getting its butt kicked by everybody." His advice was to sell. I am not sure how many followers of his were Sony shareholders anyway but they probably won't be eager to buy; maybe to short however. I bet Sony can't wait to get its PS3 to market and silence its critics. It's questionable however how much impact PS3 will have on the entire company's profitability. Nonetheless, Sony may be feeling even more confident after sluggish sales of the Xbox 360 so far in Japan. It is said Sony already controls 80% of the game console market in Japan.