ETF XRAY

Why Not a Philippine's ETF

Why not an exchange-traded fund for the Philippines? It's economy has been on a roll due to more foreign direct investment, a stronger currency, higher tax revenues and relatively successful election last week.

Peter Garnham of the Financial Times reports that the Philippine peso jumped to its highest level for nearly seven years against the dollar Tuesday as stocks in Manila hit a record peak. A ten year peak to be precise. Analysts said the move was sparked by comments from Gloria Arroyo, the Philippine president, who said the currency’s strength was keeping inflation low and added that she looked forward to “many more unheard of highs” in financial markets. The peso, which has risen 6.9 per cent against the dollar so far this year, rose 1 per cent to a high of 45.835 pesos, the first time it has risen through the 46 pesos level since September 2000 and its largest one-day gain since March 2003.

There has been a series of good news about the Philippine's economy. It is expected to grow by more than 6% this year data outsourcing is a $3.6bn industry that the local trade body expects to top $12bn in four years. President Gloria Macapagal Arroyo has pushed through sales tax increases so that the country is less dependent on foreign debt. The political landscape appears stable. All this has impressed foreigners and the proof is that Texas Instruments announced plans for a $1bn assembly test site.

One problem with an ETF for the Philippines is the dominance of Philippine Long Distance Telephone or PLDT which would have to be capped below its market cap weighting. It has an ADR that trades in the U.S. and is seen by many as a proxy for the overall market.

By Carl Delfeld of the Chartwell ETF Advisor

Southeast Asian ETFs Manufacturing Power

Asian ETFs such as the South Korean ETF (EWY), Singapore ETF (EWS), Indonesian ETF (IF), Malaysian ETF (EWM), Taiwan ETF (EWT), India ETF (IIF) and the Philippines are all benefiting from a surprising trend in global manufacturing.

In eight months Intel has committed as much money to Vietnam as it had to China during the previous ten years. In Malaysia, Flextronics has ramped up the production lines of a new M$400m ($110m) factory to make computer printers for another American firm, Hewlett-Packard and in Indonesia, Yue Yuen, a Hong Kong-based shoemaker, has been rapidly increasing its footwear for brands like Nike and Adidas.  

All of these developments are highlighted in a current Economist article that describes how South East Asian countries, rather than being hurt by Chinese growth, are being helped by it. Taken together, South Korea, Taiwan, India and the Association of South-East Asian Nations (ASEAN) increased their share of global manufacturing from less than 7% to more than 9% in the decade to 2003. Exports also rose across the board.

Interestingly, only the United States and Canada saw their shares of global output rise—with just over a quarter between them. Most things nowadays might seem to be made in China, but North America remains the true workshop of the world. American manufacturing output leads the world and is twice its nearest competitor,
Japan.  

As the Economist article points out, costs are only part of the equation. Just as important is diversification. Having already moved a big chunk of their production to China, many firms are reluctant to put any more of their eggs in the same basket.

Southeast Asian ETFs Boosted by Rising Output

Asian ETFs such as the South Korean ETF (EWY), Singapore ETF (EWS), Indonesian ETF (IF), Malaysian ETF (EWM), Taiwan ETF (EWT), India ETF (IIF) and the Philippines are all benefiting from a surprising trend in global manufacturing.

In eight months Intel has committed as much money to Vietnam as it had to China during the previous ten years. In Malaysia, Flextronics has ramped up the production lines of a new M$400m ($110m) factory to make computer printers for another American firm, Hewlett-Packard and in Indonesia, Yue Yuen, a Hong Kong-based shoemaker, has been rapidly increasing its footwear for brands like Nike and Adidas.

All of these developments are highlighted in a current Economist article that describes how South East Asian countries, rather than being hurt by Chinese growth, are being helped by it. Taken together, South Korea, Taiwan, India and the Association of South-East Asian Nations (ASEAN) increased their share of global manufacturing from less than 7% to more than 9% in the decade to 2003. Exports also rose across the board.

Interestingly, only the United States and Canada saw their shares of global output rise—with just over a quarter between them. Most things nowadays might seem to be made in China, but North America remains the true workshop of the world. American manufacturing output leads the world and is twice its nearest competitor,
Japan.

As the Economist article points out, costs are only part of the equation. Just as important is diversification. Having already moved a big chunk of their production to China, many firms are reluctant to put any more of their eggs in the same basket.

Chartwell ETF Advisor’s Asian Opportunity ETF portfolio holds many of the ETFs discussed in this post.
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