But, as with most investing schemes from our view, timing is everything.
Japan certainly is in decline. Its debt burdens combined with poor demographics suggest a country that has more long term problems than the eurozone currently. For them these issues are becoming better known throughout the investment world. Clearly most know the markets there have been in a bear market since the 1990 peak with the exception of a few impressive bear market rallies. Nevertheless, large and even small Japanese companies have become multinational in scope and highly dependent on exports. Most are diversified and may do well given their global exposure away from domestic bear markets or conditions.
The former Asian Tiger markets have more volatility (beta) compared with other more established markets. When markets and global economies are stronger these markets generally with outperform; and, conversely when global economies are weak they will underperform. The Philippines, Indonesia, Malaysia and Vietnam are blessed with both good demographics (younger population) and are rich in natural resources. Longer term these economies could decouple from other markets given their own domestic demand and needs.
In this sector there really are only 10 ETFs worth evaluating now. But as these economies grow no doubt many will ETF offerings will expand into various subsectors within each country beginning with small-caps and then various others: consumer, financial, natural resources and so forth.
We rank the top 10 ETF by our proprietary stars system as outlined below. If an ETF you're interested in is not included but you'd like to know a ranking send an inquiry to support@ETFDigest.com and we'll attempt to satisfy your interest.
Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.
Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions
EWJ follows the MSCI Japan Index which is a proprietary index covering the Japanese equity market. The fund was launched in March 1996. The expense ratio is .54%. AUM (Assets under Management) equal $5.3 billion and average daily trading volume is 16M shares. (In early summer 2011 AUM were $8 billion and average daily trading volume was over 28M shares demonstrating the flight from international markets in general.) As of early January 2012 the annual dividend yield was 3.00% and YTD return -.44%.
A competitive issue would be JPP (SPDR Russell/Nomura Prime Japan ETF) with an expense ratio of .50% and AUM of $14 million and average daily trading volume of less than 4K shares.
Also ProShares features leveraged products for hedging and speculating with similar tracking characteristics to EWJ and others.
We rank Japan at the top of the list due to its size and quality of companies within the related index, which for the most part, are multinational companies that are household names.
Data as of First Quarter 2012 EWJ Top Ten Holdings & Weightings
- Toyota Motor Corp (7203): 4.37%
- Mitsubishi UFJ Financial Group, Inc. (8306): 2.63%
- Honda Motor Co Ltd (7267): 2.47%
- Canon, Inc. (CAJFF): 2.41%
- Sumitomo Mitsui Financial Group Inc (SMFNF): 1.77%
- Takeda Pharmaceutical Co., Ltd. (4502): 1.55%
- Fanuc Corp (6954): 1.44%
- SOFTBANK Corp (SFTBF): 1.44%
- Mizuho Financial Group Inc (8411): 1.43%
- Mitsubishi Corporation (8058): 1.35%
Data as of First Quarter 2012 ITF Top Ten Holdings & Weightings
- Toyota Motor Corporation (7203): 5.36%
- Mitsubishi UFJ Financial Group, Inc. (8306): 3.64%
- Canon, Inc. (CAJFF): 3.25%
- Honda Motor Company (7267): 2.88%
- Nippon Telegraph and Telephone Corporation (9432): 2.45%
- Sumitomo Mitsui Financial Group, Inc. (SMFNF): 2.37%
- Mizuho Financial Group, Inc. (8411): 1.96%
- Takeda Pharmaceutical Co., Ltd. (4502): 1.91%
- Fanuc Ltd. (6954): 1.82%
- Mitsubishi (8058): 1.75%
- Samsung Electronics Co Ltd (SSNLF): 19.62%
- Hyundai Motor Co Ltd (HYUO): 5.81%
- POSCO: 4.31%
- Hyundai Mobis: 3.66%
- Shinhan Financial Group Co., Ltd.: 3.09%
- Kia Motors Corp: 2.96%
- Lg Chem Ltd: 2.65%
- KB Financial Group: 2.45%
- Samsung Electnc Pfd: 2.24%
- Hynix Semiconductor Inc: 2.04%
EWT follows the MSCI Taiwan Index which remains a proprietary index following securities in the general Taiwan equity market. The fund was launched in June 2000. The expense ratio is .71%. AUM equal $2.2 billion and average daily trading volume is 9M shares. (In the early summer 2011 AUM was $3.4 billion which shows losses in markets as well as investors outflows.) As of early January 2012 the annual dividend yield was 2.21% and YTD return was 1.02%.
Taiwan markets are considered domestically as a "retail" market making for less institutional activity. One of the primary market drivers is Taiwan Semiconductor.
Data as of First Quarter 2012 EWT Top Ten Holdings & Weightings
- Taiwan Semiconductor Manufacturing (2330): 17.53%
- Hon Hai Precision Ind. Co., Ltd. (2317): 6.83%
- Chunghwa Telecom Co Ltd (2412): 3.58%
- HTC Corporation (2498): 3.30%
- China Steel Corporation (2002): 3.14%
- Formosa Plastics Corporation (1301): 3.07%
- Mediatek Inc. (2454): 2.70%
- Nan Ya Plastics Corporation (1303): 2.52%
- Formosa Chemicals & Fibre Corporation (1326): 2.14%
- Cathay Financial Holding Co., Ltd. (2882): 1.98%
It's important to remember Singapore is the financial and economic hub for most of Southeast Asia. Its harbor is one of the largest and busiest in the world.
Data as of First Quarter 2012
EWS Top Ten Holdings & Weightings
- Singapore Telecommunications Limited (Z74): 11.74%
- DBS Group Holdings Ltd (D05): 10.29%
- Oversea-Chinese Banking Corp Ltd (O39): 9.51%
- United Overseas Bank Limited (U11): 9.34%
- Keppel Corp Ltd (KPELF): 6.29%
- Wilmar International Ltd (F34): 4.49%
- Genting Singapore PLC (G13): 4.42%
- Jardine Cycle & Carriage Ltd. (C07): 3.12%
- CapitaLand Limited (C31): 3.10%
- Singapore Press Holdings Limited (T39): 2.94%
EWM follows the MSCI Malaysia Index which is a proprietary index follow the equity market of Malaysia. The fund was launched in March 1996. The expense ratio is .53%. AUM equal $856 million and average daily trading volume is 1.9M shares. (These figures compare with $1.1 billion and average daily trading volume equals 2.6M shares in the early summer 2011.) As of early January 2012 the annual dividend yield was 4.06% and YTD return .90%.
Malaysia remains a resource rich country (rubber & palm oil) with excellent demographics indicating a consumer driven economy as well.
Data as of First Quarter 2012 EWM Top Ten Holdings & Weightings
- CIMB Group Holdings Berhad: 9.61%
- Malayan Banking Bhd Maybank: 7.78%
- Sime Darby Berhad (Malaysia): 6.78%
- Genting Bhd (3182): 6.23%
- IOI Corp Berhad: 4.48%
- Tenaga Nasional Berhad: 4.29%
- Petronas Chemicals: 4.00%
- Public Bank Berhad: 3.69%
- Axiata Group BHD: 3.61%
- Maxis Bhd: 3.45%
IDX follows the Market Vectors Indonesia Index which features companies domiciled in Indonesia or earning at least 50% of their revenues from the country. The fund was launched in January 2009. The expense ratio is .60%. AUM equal $503 million and average daily trading volume is 366K shares. (In early summer 2011, AUM was $800 million and average daily trading volume is 400K shares reflecting the sharp market decline.) As of early January 2012 the annual dividend yield was 1.6% and YTD return was 1.4%.
Like other countries in the region, Indonesia is rich in natural resources from timber, agriculture mining and energy. The country is also an OPEC member.
Data as of First Quarter 2012 IDX Top Ten Holdings & Weightings
- Astra International Tbk (ASII): 8.46%
- Bank Central Asia Tbk (BBCA): 8.07%
- P.T. Telekomunikasi Indonesia Tbk. ADR (TLK): 6.95%
- Bank Rakyat Indonesia (Persero) Tbk B: 6.69%
- PT Bank Mandiri (Persero) TBK: 5.92%
- United Tractors Tbk: 4.36%
- PT Perusahaan Gas Negara (Persero) TBK (PGAS): 3.86%
- Bumi Resources Tbk: 3.53%
- Gudang Garam TBK: 3.51%
- Golden Agri-Resources Ltd. (E5H): 3.50%
Tsunamis and flooding didn't slow the Thai market down much. Once again this is due to excellent demographics and large natural resources.
Data as of First Quarter 2012 THD Top Ten Holdings & Weightings
- PTT Public Co Ltd: 10.92%
- PTT Exploration & Production PCL (PTTEP): 7.53%
- Siam Commercial Bank Public Co Ltd: 7.06%
- Kasikornbank Public Company, Ltd. (KBANK-F): 5.77%
- Bangkok Bank PCL (BBL-F): 5.53%
- Advanced Info Service Public Company Limited: 5.19%
- CP All Public Co Ltd: 4.59%
- Ptt Chemical Public Company Limited ADR (PTTCH-R): 4.55%
- Siam Cement: 4.45%
- Charoen Pokphand Foods Public Co Ltd: 4.14%
The Philippines is another resource rich country with mining, agriculture and excellent demographics making the consumer sector more dynamic. Most important is this is the best performing market of the group overall.
Data as of First Quarter 2012 EPHE Top Ten Holdings &Weightings
- Philippine Long Distance Telephone (PHTCF): 8.84%
- SM Investments Corp: 8.17%
- Ayala Land Inc: 6.98%
- Aboitiz Equity Ventures Inc: 6.48%
- Sm Prime Holdings Inc: 6.05%
- Manila Electric Co: 5.69%
- Aboitiz Power Corp: 4.58%
- Ayala Corp: 4.35%
- BDO Unibank Inc: 4.32%
- Energy Development Corp: 3.86%
Here it should be noted that inflation and currency devaluation have crippled equity performance. Further the economy and country are still heavily state controlled as a carryover from communist days continues. This doesn't help the free market economy despite much investor interest in the country.
Data as of First Quarter 2012 VNM Top Ten Holdings & Weightings
- BaoViet Holdings: 8.49%
- Vietnam Joint Stock Commercial Bank for Industry and Trade: 6.94%
- Petrovietnam Fertilizer & Chemicals: 6.30%
- Joint Stock Commercial Bank For Foreign Trade of Vietnam: 6.24%
- Vincom Joint Stock Co: 6.23%
- Premier Oil PLC (PMO): 6.03%
- Charoen Pokphand Foods Public Co Ltd: 5.79%
- Oil & Natural Gas Corporation Ltd. (ONGC): 5.06%
- Talisman Energy Inc (TLM): 4.71%
- Gamuda Berhad: 4.54%
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The ETF Digest has no current positions in the featured ETFs.
(Source for data is from ETF sponsors and various ETF data providers)