As economies and major indexes tumbled around the world in May, it was once again developed markets that were to blame for the weakness. Lingering concerns over the health of the euro has had a devastating effect on all of the economies in Europe, while the fallout from the Gulf oil seems ready to weigh on the energy sector of the American economy for the foreseeable future. Meanwhile, a strong dollar has hammered many of the top resource producing nations such as Brazil, Australia, Canada, and Russia. This has left many investors to fall back on China, which has emerged as a global growth engine. But Beijing has warned several times of curtailing bank lending in order to prevent the economy from overheating.
A global economy that seemed to be thriving just months ago is now riddled with question marks. But one section of the globe appears to be roaring ahead against these headwinds: Southeast Asia.
The Association of Southeast Asian Nations (or ASEAN) consists of ten members with an aggregate population of slightly more than 580 million people. Although there is not currently an ETF tracking the region as a whole, five of the six largest economies in the bloc currently have ETFs tracking their individual countries. Despite the weakness in virtually all of the markets around the world, these Southeast Asian ETFs have persevered; several of the ETFs that track these countries are up on the year, while most major benchmarks are now in the red. Below, we profile the six ETFs that track this unique segment of the international market that could make an interesting addition to any investor’s portfolio (see Seven ETFs That Don’t Exist But Should).
iShares MSCI Malaysia Index Fund (EWM)
Despite a loss of 7.5% over the past four weeks, EWM has posted a gain of 4.6% thus far in 2010, the second highest gain in the ASEAN region. The Malaysia ETF is well diversified, especially for an emerging market. Four sectors account for more than 10% of total assets, and consumer goods and services receive a significant allocation (a rarity for emerging market funds). EWM is light on energy firms, as well as health care and technology names, which combine to make up less than 1% of the total fund assets (see Three Country ETFs With Low Correlations to SPY).
iShares MSCI Indonesia Investable Market Index Fund (EIDO)
EIDO is a new fund which seeks to track the MSCI Indonesia Investable Market Index, a free-float adjusted market capitalization weighted benchmark designed to measure the performance of equity securities in the top 99% by market capitalization of equity securities listed on stock exchanges in Indonesia. EIDO has only been around for a month but it is up 4.5% over the past week and 1.8% over the past month, a far superior return to most funds during the tumultuous month of May (see EIDO’s fact sheet for more information).
iShares MSCI Singapore Index Fund (EWS)
As the only true developed market in the region, EWS suffered more than most from issues in Europe. The fund is down 10.5% over the past four weeks and it has produced a loss of 6.4% thus far in 2010, both the worst among ASEAN ETFs. EWS is heavily focused on the financial sector which makes up just more than half of the fund’s total assets. EWS holds about 31 stocks, so it is not surprising to see that roughly 70% of EWS is concentrated in its top 10 holdings. Although the country has had the worst performing ETF in the region, the future could be bright for this city-state; it recently reported an absurd level of quarterly GDP topping 32% (read the full story here). If that is coming out of the worst performer it is pretty safe to say that the region is doing quite well despite the downturn.
Market Vectors Indonesia Index ETF (IDX)
IDX is pretty well diversified among sectors with large allocations going towards financials (25%) and industrial materials (19.8%). However, the fund has no securities that are engaged in the technology or health care sectors, so investors will have to achieve that international exposure elsewhere. Indonesia has been soaring as of late due to strengthening commodity prices and one of its main components, Astra, hiking its dividends. IDX is up 6.8% thus far in 2010 despite a 10% loss over the past month (also see IDX Surges Ahead).
iShares MSCI Thailand Index Fund (THD)
Despite relentless protests from the “Red Shirts” and ensuing violence in Bangkok, THD has held up surprisingly well in recent weeks. The fund is down just 3.9% over the past month and is up 3.7% thus far in 2010. THD is more typical of an emerging market ETF, depending heavily on two sectors to make up slightly more than two-thirds of its total assets: financials and energy. THD focuses on large and giant cap corporations which make up 62% of its total assets compared to just 6% for small and micro cap securities (see Thailand ETF Shrugs Off Chaos In Bangkok).
Market Vectors Vietnam ETF (VNM)
Vietnam has been one of the worst performing countries in the Southeast Asian area, posting a loss of 5.2% thus far in 2010 with a loss of 9.2% over the past four weeks. VNM only holds 32 companies and is highly focused on three sectors which make up almost 65% of the fund’s total assets; financials, energy, and industrial materials. This is achieved by tracking the Market Vectors Vietnam Index, which provides exposure to publicly traded companies that, predominantly, are domiciled and primarily listed in Vietnam and which generate at least 50% of their revenues from Vietnam. Despite its recent weakness, things may be turning around for VNM, the fund is up almost 5% over the past week (see Seven Most Corrupt Country ETFs).
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Disclosure: No positions at time of writing.