Among emerging markets single-country exchange traded funds, there are some marquee names that for good and bad reasons are frequent headline grabbers. Over the past year, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) and the Market Vectors Russia ETF (NYSEArca: RSX) have gained notoriety for all the wrong reasons while the WisdomTree India Earnings Fund (NYSEArca: EPI) reminded investors there is still opportunity in the emerging world.
The iShares MSCI Malaysia ETF (NYSEArca: EWM) is not EWZ or EPI in terms of fame or assets under management, but the lone dedicated Malaysia ETF could be ready to grab some positive headlines of its own this year.
“Coming into the week, Malaysia has been setting up for what I think could be a violent mean reversion to the upside. In 2014 the MSCI Malaysia ETF $EWM lost close to 15% for the year while the S&P500 rallied over 11%. I think we’re about to see money rotating into Malaysia at a faster rate that the U.S.,” notes J.C. Parets of Eagle Bay Capital.
Measured against the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), an ETF that allocates 3.5% of its weight to Malaysia, EWM has mixed record of annual performances. Over the six-year period ending at the end of 2014, EWM outperformed EEM on three occasions with no ties.
Last year, EWM lost 11.6%, including paid dividends, compared to 3.9% loss for EEM. Still, there are fundamental reasons to consider EWM. Prime Minister Najib Razak has been cutting down on government subsidies to limit fiscal risks in an effort to steer the country toward high-income status and toward more domestic consumption. Consumption is now said account for over half of Malaysia’s gross domestic product. [Malaysia Economy Gains Strength]
EWM is off 3.6%, but with the ETF potentially finding critical support in recent sessions, the fund’s technical outlook shows positive risk/reward for interested investors.