ETFs for Goldman’s Asia Call

September 30th at 7:00am by Tom Lydon

The bank also implied foreign investors are under-allocated to South Korea, CNBC reported. The bank added that AAA-rated Singapore is one of the safer avenues in South Asia. In the past three months, EWY has jumped nearly 17% while the iShares MSCI Singapore ETF (NYSEArca: EWS) is up 5.5%. [Sunny Days for EM ETFs if Fed Resists Tapering]

Since the start of September, EWY, along with the equivalent Brazil and China ETFs, has seen inflows as investors began embracing emerging markets ETFs after the Fed opted not to taper its bond-buying program. [Cash Flows Back to Emerging Markets ETFs]

South Korea is perceived as being one of the lower beta, least volatile emerging markets and that trait could explain why investors are embracing EWY. While South Korea’s reputation as a more advanced, less volatile emerging market could serve as a positive underpinning for EWY, Goldman is not as enthusiastic about some other Asian markets.

The bank is “market weight” on China, Philippines, Taiwan and Thailand and “underweight” on Australia, Hong Kong, Indonesia, India and Malaysia, according to CNBC.

Goldman recommended a long/short trade in the report, advising long positions in EWY and the iShares MSCI Taiwan ETF (NYSEArca: EWT) and short positions in the WisdomTree India Earnings ETF (NYSEArca: EPI) and the iShares MSCI Indonesia ETF (NYSEArca: EIDO). Like South Korea, Taiwan is viewed as a low-beta, highly advanced emerging market. EWT has a beta of just 0.47 against the S&P 500, according to iShares data.

Due to plunging currencies and widening account deficits, EPI and EIDO are down 20.1% and 18.4%, respectively, year-to-date.

iShares MSCI South Korea Capped ETF

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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