Why do some events have limited effects on world markets? Consider North Korea's recent determination to develop its plutonium and to launch its missiles capable of carrying nuclear warheads. One might have expected some trepidation by its Asian neighbors.
Yet the iShares MSCI South Korea Fund (NYSEARCA:EWY) has barely missed a heartbeat in 2009. The basket of top South Korean companies has collectively put together a 4-month run of approx 24% through April 29. It has also managed a feat that few nations have achieved yet... a position above its 200-day, long-term moving average.
In truth, it's mostly about a growth bias. Investors are flocking to the potential growth of Korean info tech names like Samsung and LG, as well as the market share pick-up by Hyundai (OTCPK:HYMLF). And yet, even on the value front, you have the Oracle of Omaha himself with a 4%+ stake in Korean steelmaker Posco (NYSE:PKX). Each of these companies is heavily represented in the iShares MSCI South Korea Fund (EWY).
At the same time, I'm having some trouble understanding the strong appeal of the iShares MSCI Malaysia Fund (NYSEARCA:EWM) right now. But the numbers don't lie!
EWM is up about 15% in 2009. Even more impressive, it has one of the lowest "percentages-off-its-high" of any nation in the industrialized or developing world... about -30%. (Yep... 30% off a high is one of the best bear market performing country ETFs around!)
Although Malaysia exports petroleum, liquefied natural gas, wood and rubber, the iShares MSCI Malaysia Fund (EWM) consists of 30% exposure to the financial segment. That seems a bit aggressive compared to Korea's 14%. EWM has another 20% tied to the cyclical industrial sector.
Other concerns include one of the highest P/E ratios for countries anywhere, significant changes in the ruling political party of Malaysia, as well as China's dominance as the world's manufacturer. Do Malaysian companies have an equally compelling competitive position as Korea to be able to differentiate from the less expensive manufacturers of China?
One thing that can't be overlooked on Malaysia (EWM) is the 30-day SEC yield of 7.4%. The income alone may be the most enticing factor, alongside a coordinated economic recovery worldwide.
Last, but certainly not least, there's Taiwan. Many of my readers know that I've lived briefly in Taiwan, as well as Hong Kong and Thailand. So I'm quite familiar with the work ethic and work product.
The iShares MSCI Taiwan Index Fund (NYSEARCA:EWT) was a long-term underperformer throughout the bull market. And it didn't exactly withstand the brunt of the bear.
Yet there's one thing that Taiwan is particularly adept at and that's technology. In fact, EWT is highly correlated to the semiconductor space, another disappointing sector from the 2003-2007 bull market.
But lo and behold, semiconductors are returning with a vengeance. (See last month's, "Semiconductors Are Winning in More Ways than One." )
With a 60% weighting in information technology, the iShares MSCI Taiwan Index Fund (EWT) closely tracks the results of the Goldman Sachs Semiconductor Fund (IGW). And let's face it- technology has been in vogue!
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