Investing in Frontier Market and Emerging Market ETFs

The Philippines has been getting into the news more for positive rather than the usual negative reasons, meaning some investors might want to consider investing in the iShares MSCI Philippines Investable Market Index Fund (EPHE) and the Philippine Long Distance Telephone Company (PHI), otherwise known as PLDT. However, I must admit that it is hard for anyone who has ever lived or worked in the Philippines for a considerable period of time to not be a little cynical about the country as it’s usually two steps forward and almost always one step back (and sometimes one step forward and two steps back). But consider the following signs of progress:

Election violence has been on the decline (statistically speaking).
Is it time to invest in the Philippines?
Some high level corruption has or is being tackled.
Some Filipino professionals are returning home as the local economy posts solid growth (6% to 8%) versus the rest of the world.

I should also mention my last article about the Philippines (A ‘Damaged Culture’ No More? An Investing-In-The-Philippines Reality Check) where I suggested investors should read a controversial essay (“A Damaged Culture: A New Philippines?“) written by James Fallows for the Atlantic Monthly just after Marcos was booted out of power. I had also outlined how (for better or for worse) the Philippine economy is a stool propping up oligarchs.

With that said, has the Philippines really made any steps forward to make investing there worth it or is the country back to its old two steps forward and one or more steps back routine?

Malaysian Elections: Will The Malaysia ETF Rally or Sink?

On May 5, Malaysia will hold its 13th General Election and investors in the iShares MSCI Malaysia Index Fund ETF (EWM) should pay close attention to the results and what happens in their aftermath because the last time elections were held, the Malaysian stock market experienced a 10% one-day plunge – only to recoup most of those losses before sinking again during the global financial crisis.

Petronas Towers, Kuala Lumpur — Should you invest in the iShares MSCI Malaysia Index Fund ETF (EWM) before Malaysia’s elections?

A Quick Update About the 2013 Malaysia Elections

In my last article about Malaysia (The Malay Dilemma: Is Malaysia A Safe Emerging Market Investment?), I wrote in considerable detail about the dilemma Malaysia presents for investors because of its complicated history, ethnic and political situation. However, I also wrote why Malaysia is potentially an attractive emerging market for all sorts of investors.

To recap Malaysia’s current political situation and the elections: The country has been ruled by a coalition of political parties known as the Barisan Nasional [BN] since its independence from Britain in 1957. The BN coalition consists of the United Malays National Organization [UMNO)] the Malaysian Chinese Association [MCA], the Malaysian Indian Congress [MIC] and several small political parties mostly from East Malaysia (the states of Sabah and Sarawak on the island of Borneo). However, its UMNO and the Muslim Malay majority, or the so-called “Bumiputera” (“son of earth” or “son of the soil”), who call the political shots in Malaysia and effectively run the country.

The Singapore Story: Not a Sure Thing for Investors?

Lee Kuan Yew, the controversial founding father and former prime minister of Singapore, summed up his country’s history best when he entitled his memoirs, From Third World to First: The Singapore Story. However, there is more than one version of the Singapore story – something investors in the iShares MSCI Singapore Index Fund ETF (EWS), the iShares MSCI Singapore Small Cap Index Fund (EWSS) and The Singapore Fund (SGF), the primary investment options American investors have for investing in Singapore or in the Southeast Asian equities listed there, need to be aware of.

Investing in Singapore — The Marina Bay Sands in Singapore.

Among the other versions of the Singapore story is one that says the country was destined to succeed (at least in the past) simply because of its strategic location, deep water port and “one degree more” of efficiency in an otherwise “bad neighborhood” filled with mismanagement, corruption and political uncertainty. And then there is a recently written post (or rather a lengthy rant entitled “i dun unerstan u lah!: An exposé of Singapore and Singaporean retardation“) which has attracted wide attention online as it was written by an anonymous European working in Singapore and he or she goes into considerable detail to describe so-called “Singaporean retardation” or “stupidity.” Finally, Singaporeans themselves are growing increasingly restless over their country’s high cost of living, the presence of large numbers of foreign workers and corruption scandals – which could spell trouble for the long-ruling People’s Action Party (PAP) in the 2016 general elections with such changes impacting the iShares MSCI Singapore Index Fund ETF, the iShares MSCI Singapore Small Cap Index Fund and The Singapore Fund.

The Malay Dilemma: Is the Malaysia ETF a Safe Emerging Market Investment?

If western investors ever think of Malaysia, they probably think of the Petronas Towers, the sodomy trials of opposition leader Anwar bin Ibrahim and controversial former Prime Minister Mahathir bin Mohamad instead of the “The Malay Dilemma,” the latter’s just as controversial book that has largely set the country’s course for the past 40 years. It doesn’t help when the iShares MSCI Malaysia Index Fund ETF (EWM) is the only easy way for most western investors to invest in Malaysia – making the country Southeast Asia’s forgotten emerging market.

However, Malaysia may soon be on the radar of western media and investors alike again this year because the Barisan Nasional (BN), the coalition of political parties that has ruled Malaysia for 54+ years, must hold elections by the end of June. Moreover, Malaysia’s large Chinese and Indian minority populations along with both liberal and Malay Islamic conservatives are restive for change.

But before you consider investing in Malaysia or the iShares MSCI Malaysia Index Fund ETF, it would be a good idea to have a more thorough understanding of what “The Malay Dilemma” is along with the country’s current political situation.

Apocalypse Now For Investors? A Realistic Vietnam Investment Review

The Economist has entitled a story about Vietnam as “A tiger at bay,” but perhaps a more thorough Vietnam investment review would have led to the title “Apocalypse Now” – especially since the Market Vectors Vietnam ETF (VNM) is the only easy way for American investors to invest in the country right now and that ETF contains a few (unwanted) surprises for risk adverse investors. More adventurous investors could invest in VinaCapital (VCVOF.PK), which manages the following three closed-end funds: The VinaCapital Vietnam Opportunity Fund Limited (VOF), VinaLand Limited (VNL) and Vietnam Infrastructure Limited (VNI). However, those Vietnam closed-end funds trade on the AIM Market of the London Stock Exchange which largely places them out of reach for most American investors trading with discount brokerage accounts.

City Hall, Ho Chi Minh City — A thorough Vietnam investment review could have you concluding that the country is more than “A tiger at bay.”

So why could Vietnam be an “Apocalypse Now” for investors at this point in time? Let me first tell you about my experience living and working in Vietnam so that you can decide for yourself whether Vietnam is the best emerging market to invest in right now and then why Vietnam investments like the Market Vectors Vietnam ETF may not be your best emerging market ETF choice.

A Damaged Culture No More? Investing in the Philippines

The Philippines has the dubious distinction of being called “a damaged culture” or “the sick man of Asia,” but the country is also considered to to be one of the so-called Tiger Cub Economies of Southeast Asia and one of the Next Eleven (N-11) countries. Unfortunately, American investors have few options for investing in the Philippines as the iShares MSCI Philippines Investable Market Index Fund (EPHE) and the Philippine Long Distance Telephone Company (PHI) or PLDT are the only Philippine ETFs or ADRs trading on major US stock changes as other well-known Philippine companies like Ayala Corp (AYALY.PK), Globe Telecom (GTMEF.PK), Jollibee Foods Corp (JBFCF.PK), San Miguel Corp (SMGBY.PK) and SM Investments Corp (SVTMY.PK) are only thinly traded on the OTC.

Manila Bay, The Philippines — Before investing in the Philippines, investors should read James Fallows’ Atlantic Monthly essay: “A Damaged Culture: A New Philippines?”

Nevertheless, the election of Benigno “Noynoy” Aquino III, the son of former President Cory Aquino who replaced dictator Ferdinand Marcos, has fueled optimism that the Philippines has finally turned a corner. But before you consider investing in the Philippines through Philippine ETFs or stocks like the iShares MSCI Philippines Investable Market Index Fund or the Philippine Long Distance Telephone Company, investors might want to consider reading a controversial essay written by James Fallows for the Atlantic Monthly entitled: “A Damaged Culture: A New Philippines?”

Speculators And Hit-And-Runs: Investing in Indonesia

Indonesia is the world’s fourth most populous country, has the world’s largest Muslim population and is considered a good candidate to be added to the so-called list of BRIC countries; but when it comes to investing in Indonesia, American investors would be limited to telco stocks PT Indosat Tbk (IIT) and PT Telekomunikasi Indonesia (TLK) as both trade as ADRs on the NYSE; Indonesia ETFs like the iSHARES MSCI Indonesia Investable Market Index Fund (EIDO), the Market Vectors Indonesia Index ETF (IDX) and the Market Vectors Indonesia Small-Cap ETF (IDXJ); and closed-end fund Aberdeen Indonesia Fund Inc (IF).

Borobodur, Java, Indonesia — Investing in Indonesia, like traveling there, is not without risk.

While that might be a larger than normal selection for American investors compared with other emerging markets, its still fairly limited given Indonesia’s potential economic importance. However, is investing in Indonesia even worth considering and if so, what should you invest in?

Before we look at the options for investing in Indonesia, let me tell you about my recent three week trip to the Indonesian island of Sumatra and the Indonesian city of Medan – which probably has one of the fastest growing economies in the country.