Macro Tsimmis

intelligently hedged investment

BUY MSCI Malaysia Index (EWM…again)

Posted by intelledgement on Tue, 21 Jul 09

As those who were with us when we launched this portfolio back at the end of 2006 may recall, Malaysia is one of our favorite places to invest outside of the USA, and the iShares MSCI Malaysia Index ETF was one of our original 11 positions. But in March 2008, we liquidated the position at a profit (ROI of 29% and CAGR of 24%), as we moved to a more defensive position.

Now that we are lightening up on our shorts, we are looking to increase our long exposure and EWM looks good here, at virtually the same price we got it at back in January 2007. Meantime, conditions for business in Malaysia remain strong. Their per capita GDP is up from $14,200 in 2006 (the latest number we had in January 2007 was $12,900 in 2005) to $15,300 in 2008. For comparison’s sake, they are just behind Russia ($15,800) but well ahead of Brazil ($10,100), China ($6,000), and India ($2,800)…not to mention Mexico ($14,200), Turkey ($12,000), and Thailand ($8,500), to name a few. The BRIC countries are all growing faster, and GDP growth was down in 2008 to +5.1%, but that still looks good from here (the USA was +1.3% in 2008).

The iShares MSCI Malaysia Index exchange-traded fund (EWM) is heavily weighted towards financial services (31%) and industrials (20%), aptly reflecting the sweet spots of the Malaysian economy. There is also significant representation for consumer staples (15%), consumer discretionary (13%), utilities (13%), and telecom (7%), reflecting the high income levels of the populace. The P/E ratio is running around 16 and the yield is 3%. EWM is moderately traded (1.2MM shares/day).

Previous EWM-related posts:

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