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ASEAN STOCK WATCH 7  August  2010


Shayne Heffernan

Gaining investment exposure to all of the sectors and all of the nations in ASEAN is almost impossible for a single investor, but it is possible to do by using New York Traded ETFs.

An exchange-traded fund (ETF), also known as an exchange-traded product (ETP), is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.

An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be “ETFs”, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively managed ETFs.

This is a list of Shayne Heffernan’s Favorite ASEAN ETFs

iShares MSCI Malaysia Index Fund (EWM)

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. EWM is very 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.

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.

iShares MSCI Singapore Index Fund (EWS)

As the most developed market in ASEAN, EWS suffered more than most from issues in Europe. The fund is well down over the past four weeks and it has seen it become the worst among ASEAN ETFs, however a US market correction will see this one leap forward. EWS is heavily focused on the finance 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.

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.

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.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.

Market Vectors Vietnam ETF (VNM)

Vietnam has been one of the worst performing countries in the Southeast Asian area. 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 over the past week.


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