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Malaysia ETFs
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About Malaysia ETFs |
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Malaysia ETFs: Overview and forecast
Malaysia isn't a well known capital market, and although Malaysia is one of the Asian Tiger economies, it's often overshadowed by Singapore. Malaysia is rather more than an emerging economy. It has a growing middle class retail investment market in addition to a developing financial sector.
As is so often the case ishares is the local representative of the ETF market, but it's an interesting study of this particular national economy, as well. iShares MSCI Malaysia Index Fund (AMEX:EWM) is a stock market index ETF, and it's a microcosm of the Malaysian economy.
This is not a small ETF. Its assets total nearly half a billion US, which is pretty respectable for any ETF. Average daily turnover in June 2009 was 1,935,100 units, at an average price of roughly $8.50. This is a very strong trading ETF, with an interesting history. In 1998 it was decimated by the Pacific Meltdown, where South East Asia's currencies hit the wall with a sickening splat. EWM nose- dived from a peak of $15 in 1997 to about $2 in 1999.
It tripled in value in 12 months, then moved sedately along trading at low volumes until the height of the bull market. EWM began trading in millions at that point, and through the crash. It bottomed out at $6.50 in March 2009, and rose to about $9 by the end of June. It has a trading pattern which indicates strong buying and sharp margins in a weekly cycle.
Short term (6 months)
EWM is based on a strictly conventional ETF model which being index based emphasizes the major stocks. In Malaysia's economy, that's not a bad idea, because these big stocks generate returns very well. Unlike other ishares national market ETFs, the Malaysian ETF is based on a less weighted balance among the major stocks, which seems to have created a relatively stable behavior pattern for it outside the boom and crash era.
The level of interest in the ETF indicates institutional investor buying at fairly regular intervals, but the pattern of trade also indicates active trading, so upside price margins are being found fairly frequently. On that basis, the short term upside looks positive for traders and investors.
Medium term (2 years)
Historically, the Malaysian economy and its market have been progressing rapidly. The current capital market is a product of relatively recent prosperity and growth. The Malaysian economy, like many South East Asian nations, took a major hit from the crash and recession, and it's waiting for its markets to revive. The medium term outlook is good, allowing for time frames in the recovery.
Long term (5 years)
The medium and long term outlooks have to be melded together for a general forecast to make sense. Malaysia's rapid growth and development have come as a result of the general regional economic renaissance triggered by China and Japan. As one of the ASEAN nations, Malaysia's economics are linked in to the regional economic situation, as well as the national.
As the region develops, so does Malaysia's economy. After independence, the Malaysian economy, formerly dependent on Singapore as its mainstay, had a rocky start, but it's now a significant capital market as a result of its growth. EWM is a product of that growth, and the ETF's barometer- like reflections of the economy's ups and downs are a good measure of its long term prospects. The Malaysian ETF market can be expected to develop and expand in direct line with the capital market.
Qualifiers to projections
The downside is Malaysia's political situation, which is often tense. Instability and some general unrest regarding development have underlined the big issues in Malaysia. These issues have a direct, instant, effect on the Malaysian markets. The current government is conservative, pro- development and entrenched, and the opposition is often reactive, and negative to some of the developments for social and economic reasons. So any prospects of a change of government can be expected to create a real uncertainty in the markets.
The capital markets also include large Chinese and Japanese interests, which adds a further level of volatility in investment patterns. The Asian regional capital market is highly fluid, and although relatively rare, big movements of capital happen at alarming speed in any form of economic crisis. Investors are advised to consider risk management as a primary factor in investment in this market.
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Last Updated on: 2010-01-14 02:03:40 |
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