International ETF Update: Spain, Malaysia, BRIC, South Korea
Spain's Economy And ETF Slow, Mirroring The U.S.
Spain's economy is still growing, but at a slower pace, and it could reflect in the country's ETF.
Ben Sills for Bloomberg reports that the Spanish economy grew only 0.3% in the first quarter, the slowest since the third quarter of 2000, and less than half of the 0.8% seen the quarter before. So what's going on?
Home sales (or lack thereof) are a big culprit, as they fell by 25% in the year to February as mortgage costs rose, banks tightened credit for potential buyers and unemployment took over. Sound familiar? Economists say there is a 50% chance the Spanish economy will slip into a recession.
Spanish building companies are slumped, some by as much as 83%, and the real estate slowdown is likely to be worse than anticipated. The economic condition because of housing in Spain is similar to that in the United States. In fact, our own domestic crisis appears to be taking its toll worldwide.
iShares MSCI Spain Index (EWP) has 38.3% of assets spread across financial services. Year-to-date, the fund is up 2.3%. Can it hang on in spite of our woes here?
Malaysia ETF Might Grow With New Rice Trade Offer
Malaysia is working hard to stabilize its rice imports, prices and supplies, all the while affecting ETFs within agriculture.
The country is ready to trade palm oil to any rice-exporting country in an effort to stabilize the domestic supply of rice, reports the Associated Press.
This type of barter deal is sure to help Malaysia stockpile its
rice, and add a new dynamic to the global rice diplomacy. Malaysia is
the world's second-largest producer of palm oil, and imports around 27%
of its rice needs annually. The hope is that they will cut imports to
14% by 2010.
Agriculture ETFs sure to feel the growth include:
- PowerShares DB Agriculture (DBA), up 9.9% year-to-date
- iPath Dow Jones AIG Grain ETN (JJG), up 6.7% year-to-date
- Elements/Rogers International Commodity Index (RJA), up 1.5% year-to-date
And the mother country's ETF, iShares MSCI Malaysia Index (EWM) may get a boost as it trades one valuable commodity for another. It could use the lift, too: year-to-date, it's down 8.1%.
BRIC ETFs Could Strengthen After Countries Meet
The BRIC countries and ETFs might be seeing even better days as the four countries meet this week to discuss economics and international cooperation.
The foreign ministers of the four BRIC countries - Brazil, Russia, India and China - are going to cover topics such as food, energy, terrorism, climate change, finance, trade and nuclear proliferation over the three-day summit, reports Joanne Von Alroth for Investor's Business Daily.
This is the first time the four countries are meeting exclusively, and many feel the quartet should be a part of the G-8 because of their strong economic growth. China and India are solid in manufacturing, while Russia and Brazil have raw materials covered.
According to Goldman Sachs, the collective wealth of these countries will outshine that of the currently more prosperous G-6 countries (France, Germany, Italy, Japan, the U.K. and the U.S.) by 2050.
Investors have enjoyed the success of these countries, as the related ETFs have been showing solid performance.
Broad exposure to these economies is available in several funds if you can't single out just country. SPDR S&P BRIC 40 (BIK) is up 26% since March and is barely a year old. Claymore/BNY BRIC (EEB) is up 31% on heavy trade over the same period.
There are 49 BRIC-related ETFs to choose from, and here is a small sample:
- iShares MSCI Brazil (EWZ): up 16.8% year-to-date
- Market Vectors Russia (RSX): up 11.2% year-to-date
- WisdomTree India Earnings (EPI): down 8.3% since inception
- SPDR S&P China (GXC): down 10.3% year-to-date
South Korea's ETF Boosted By Retail Numbers
South Korea's ETF shot up a nice 3% in trading Thursday, possibly owing in part to expanding department store sales.
They expanded for the fourth consecutive month, reports Seyoon Kim for Bloomberg. Consumers snatched up luxury items, clothes and food, which sent sales up 6.5% from a year earlier. March sales rose 6.7%.
One of those stores, Shinsegae, is 2% of the iShares MSCI South Korea (EWY). Year-to-date it's down 10%. The consumer goods sector makes up 26% of the fund.
On the flip side, the country's vice finance minister said the economy is in a downturn much like the rest of the world. The jobless rate rose to a five-month high in April as manufacturers, builders and retailers let workers go. This could be an indication that department store sales may cool.
Britain's biggest retailer is planning to purchase 36 discount stores from South Korea's E-Land for $1.9 billion, report Rhee So-eui and Rachel Sanderson for Reuters. This acquisition could challenge Shinsegae, which runs the top-ranked E-Mart chain.
The country is Tesco's second most profitable market after Britain, and this expansion might be seen as a sign that Tesco has faith in the strength of the South Korean economy.
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