Irish and Malaysian ETFs Buffeted by Political Winds

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

News from Ireland (IRL) and Malaysia (EWM) underscore the need to take politics into consideration when deciding what country exchange-traded are right for your global ETF portfolio. Malaysia and Ireland are part of Chartwell Partners managed Country ETF Rotation Folio.

Mr. Bertie Ahern unexpectedly announced this morning his resignation as Irish prime minister amid continuing questions surrounding his explanation of cash donations made to him while he was finance minister in the 1990s. Mr. Ahern, Ireland’s longest serving prime minister, denied that he had ever received a corrupt payment during his political career. Nevertheless, he said that he would tender his resignation to President Mary McAleese on May 6th just ahead of the Irish referendum on the European Union reform treaty.

Mr. Ahern was a key player in engineering Ireland's economic boom as well as the breakthrough peace deal in Northern Ireland.

In Malaysia, Prime Minister Abdullah Badawi position is weakening as members of his own cabinet are supporting an open contest for key leadership posts. His UMNO Party is facing an increasingly stiff challenge from opposition parties.

The dissent comes as the three opposition parties announced yesterday that they had agreed to form a formal coalition as a credible alternative to the government reports John Burton of the Financial Times. Mr. Abdullah last week persuaded Umno to delay party elections this year from August to December, but growing criticism from the party’s ranks is posing an increased threat to the prime minister.

This is not just inside baseball. Mr. Abdullah has led reforms that have helped Malaysia become a stellar performer. Capital controls and corruption have come down. Capital structures and costs are more transparent and efficient. Part of this is due to the 2004 reorganization of the state investment agency.

Some leading companies have also be restructured. Telekom Malaysia spun off its dynamic cellular assets and Malaysian Airline System cut bloated staff and unprofitable routes. The result is that the market is up 60% in dollar terms over the past two years, comfortably besting the MSCI Asia ex-Japan index and the dividend yield has improved from 1.9% in 2003 to an estimated 3.9% last year, according to Credit Suisse, while foreign ownership has almost doubled to 25% over the same period. Well done.

How will these new political developments affect these markets? Join the Chartwell ETF Advisor and find out.