Malaysia Rises on Crude's Tide

Investors seeking to take advantage of both stubbornly high oil prices and an equity bubble in Asia are seeing opportunities in the region's major oil-exporter: Malaysia.

As an exporter of crude, Malaysia benefits directly from a climbing price, in contrast with Asia's traditionally high-growth economies like China, Japan, Taiwan and Korea, which are all importers of oil.

"Malaysia is one of my favorite centers in the world to invest in overall," says Justin Urquhart-Stewart, a director of Seven Investment Management, one of London's largest independent asset management firms with $3.6 billion under management. "There's relative stability there, a strong demand for raw materials right now, and it has a better structure than most emerging markets."

In addition to oil, Malaysia's supply of palm oil puts the country in an increasingly powerful position in the world commodities market, says Urquhart-Stewart. Palm oil is used as an ingredient in clean energy fuels.

The Kuala Lumpur Composite Index, Malaysia's main stock exchange, has gained 23% so far this year. (In Monday's trading, the index ended up 8.14 points at 1,359.59.)

The performance is showing up in ETFs, where Malaysia is well ahead of its Southeast Asian peers this year. Since the pan-Asia late February fall, the iShares Malaysia Free Index (EWM) is up 31.2%, outperforming comparable iShares ETFs focused on Japan (EWJ: Amex), Taiwan (EWT: Amex), Singapore (EWS: Amex) and Hong Kong (EWH: Amex). Even the FTSE/Xinhua 25 Index (FXI) -- a proxy for China's roaring bull market -- is trailing behind the Malaysia ETF in the same period, having risen 17.2%.