ETF XRAY

Singapore ETF (EWS) Priced for Global Recession

By Carl Delfeld of the Chartwell ETF Advisor

Some country exchange-traded funds like Singapore (EWS) are already pricing in the impact of a global recession. Is this market confirmation of a worldwide slowdown or an opportunity for global value investors?

Singapore cut its economic growth forecast for 2008 on Thursday after the first quarterly contraction since 2003, blaming a slowdown in the US. The government said on Thursday that it had cut is economic forecast for this year to 4-6% from 4.5-6.5%. GDP growth last year was 7.7% against 8.2% in 2006.

But is everyone just buying into the global recession story without thinking independently?

Jürgen Hambrecht, head of BASF, one of the world's biggest manufacturers, said during a recent interview with the Financial Times: "I am glad to say that business in general does not show the panicking approach of the financial industry"

In a pan-European survey of expectations by the NTC Economics consultancy, 56 per cent of European manufacturers expected sales volumes to rise in the coming year compared with 12 per cent forecasting a decline.

With sales last year estimated at €58bn ($84bn), Germany-based BASF is the world's biggest chemicals producer. It sells more than 100,000 products across the world in industries from construction to textiles. About 60 per cent of the company's sales are in Europe, a fifth in North America and a sixth from Asia-Pacific.

Find out what Chartwell ETF thinks about Singapore right now.

Singapore Statesman on ETF (EWS) and Future of City-State

The New York Times reports that Mr. Lee Kuan Yew, 83, remains on the alert for perils that may exist only on the distant horizon: the rising role of China in the region as the United States looks the other way, the buffeting of the world economy, even climate change.

Singapore, is an economic powerhouse with one of the world’s highest per capita incomes and high-quality schools, health care and public services that have made it a magnet for global labor. Foreigners make up roughly a fifth of its 4.5 million residents.

Investors in the Singapore exchange-traded fund (EWS) hope that Lee Kuan Yew, Singapore’s elder statesman, is right when he recently predicted that the city-state was poised for “a golden age” over the next five years owing to its transformation into a private banking and gaming center. Manufacturing, however, still accounts of 25% of GDP and the pharmaceutical industry is also a key driver of the economy.

EWS is up 23% so far this year and is in the Chartwell ETF Advisors' Asian Opportunity portfolio.

Singapore's Stunning Growth Lifts ETF

Investors in the Singapore exchange-traded fund (EWS) hope that Lee Kuan Yew, Singapore’s elder statesman, is right when he recently predicted that the city-state was poised for “a golden age” over the next five years owing to its transformation into a private banking and gaming center. Manufacturing, however, still accounts of 25% of GDP and the pharmaceutical industry is also a key driver of the economy.

The Financial Times reports that in the three months to the end of June, Singapore’s economy expanded by 8.2 per cent from a year ago as construction grew by 17.9 per cent. The economy expanded by 7.9 per cent last year.

Singapore is building two casino resorts and a new financial centre on the southern edge of the city-state. Property developers are constructing new luxury apartment blocks to accommodate those attracted by the growing private banking industry. The Singapore stock exchange is also executing a well thought out plan to become a regional financial hub and is attracting more foreign listings on its exchange.

Posted by Carl Delfeld of the Chartwell ETF Advisor

Malaysia and Singapore Economies and ETFs

There is more than meets the eye to the outstanding performance of the Malaysian (EWM) and Singaporean (EWS) stock markets and the exchange-traded funds wich track them. There economies and markets are integrating reducing the perceived risk of investing in Malaysia which on its own is a solid middle-income country with attractive commodity and financial sectors. Relations between the two countries has also improved with progress on the always thorny water rights issue helping things along.

Sharat Shroff, Portfolio Manager for Matthews International Capital Management comments on this trend after a recent visit to the region as follows. "My recent visit to Johor suggests that there is increasing integration between Malaysia and Singapore. Land and labor cost much less in Johor than in nearby Singapore. Even on a Saturday morning, several two wheelers were making their way over to Singapore. On a regular work day it is estimated that more than 150,000 workers commute over the Johor-Singapore causeway to earn a better living.

Driving around the up and coming townships, I could tell that rising income levels are translating into better quality homes for Johor residents. The average duplex units in mass townships are selling for about Malaysian ringgit 250,000-300,000 ($73,000-$87,000) which can be comfortably supported by an annual household income of about 150,000-200,000 ringgit ($43,000-$58,000) for a couple working in Singapore."

Posted by Carl Delfeld of the Chartwell ETF Advisor

Vanguard Pacific Stock ETF (VPL)

The top ten positions of Vanguards Pacific ETF make up 18.2% of the exchange traded fund. VPL is diversified between four key countries: 1) Japan 70.10%; 2) Australia 20.20%; 3) Hong Kong 5.60%; 4) Singapore 3.60%; 4) New Zealand 0.50%.

By DE Smith of MyPortfolioView

Singapore Tax Cut and ETF

The 2007 Singapore budget unveiled last week has some measures that should benefit companies in the Singapore exchange-traded fund or ETF (EWS) basket. The Economist highlights the cut in the headline rate of corporate income tax which will be reduced from 20% to 18%. This will bring Singapore to within half a percentage point of Hong Kong, where profits are taxed at a rate of 17.5%. The tax exemption for small and medium sized enterprises will also be increased but sales taxes will go up to make up some of the revenue shortfall.

While Singapore does recognize a need to address lower income needs, public spending in Singapore is still exceptionally low as a percentage of GDP—at about 15%.

Chartwell's Asian Opportunity ETF portfolio has had the Singapore as a core holding for some time seeing it as a quality China play at the heart of Asian growth.

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.