By Zacks Equity Research
For investors seeking to know about the painful areas of investing, iShares MSCI Malaysia Index Fund (EWM) is probably on the radar now. The fund just hit a 52-week low, and shares of EWM are down roughly 36.6% from their 52-week high price of $16.32/share.
Are more pains in store for this ETF? Let’s take a quick look at the fund and its near-term outlook to get a better idea of where it might be headed:
EWM in Focus
EWM looks to track the performance of the Malaysian equity market. The fund has a focus on large caps with key holdings in the Financials, Industrials, Utilities and Telecom sectors. EWM charges investors 48 basis points a year in fees and has top holdings in Public Bank, Malayan Banking and Tenaga Nasional BHD (see all Asia-Pacific (Emerging) ETFs here).
Why the Move?
The Malaysian equity market has been an area to watch lately as its neighboring country China devalued its currency earlier last week and the Fed policy normalization has never looked so strong. Also, a falling oil price marred the stocks of the oil-rich Malaysia, which happens to be one of the largest Asian crude exporters. Political crisis is another cause of concern for Malaysia.
On the other hand, China’s currency devaluation hurt its competitiveness as an exporter. This, coupled with a strong U.S. dollar amid the looming Fed rate hike sent Malaysia’s currency ringgit to a new 17-year low last week. This resulted in depletion of Malaysia’s foreign exchange reserves and in turn soured investors’ mood toward Malaysian investing.
More Pains Ahead?
Currently, EWM has a Zacks ETF Rank #3 (Hold) so it is hard to make out its future returns one way or another. However, the fund has a negative weighted alpha of 38.21. A negative weighted alpha hints at more pain. So, it is wise to stay on the sidelines and wait for better entry points for those who are currently not into the Malaysian ETF. Things will likely take some more time to stabilize.
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