Tuesday, April 2, 2013

Another alternative to the broad US market has emerged into today’s top 10 ranks.  The 10th place iShares MSCI Malaysia Index Fund (EWM) has been lagging the world leading S&P 500 year to date but our models see opportunity in the rapidly developing country with one of Asia’s best economic records.  The world’s tallest twin towers in Kuala Lumpur symbolize that economic strength and are named for the state oil company Petronas which sees a few of its subsidiaries among the fund’s 43 constituents.

Those 43 names seek to replicate the performance of the MSCI Malaysia Index and are not beholden to the materials sectors that have historically driven the economy.  The financial sector carries the highest weight at 41.2% of AUM followed by consumer staples and discretionaries at about 10% each, all thriving on the country’s growing middle class.  Seeing a developing Asian market in the top 10 ranks does not mean our models are seeking out higher risk as this one carries a very low 1.75 Red Diamond Risk Rating.  Putting that alongside its very high 9.32 Green Diamond Reward Rating shows a spread about as wide as you will see in our models.  That high Reward Rating is driven by a very healthy 74.9 Behavioral Score deriving from a middling technical score of 63.7 combined with a strong 86.1 sentiment score as bears have positioned themselves for further lagging performance.  It’s 66.2 Fundamental Score is nothing to get excited about but with earnings season approaching that could rise as the Asian economies are stronger than most of the world.

Yesterday we wrote that we have yet to see a shift in the models’ fondness for the broad US market and indeed today’s top 2 ranks are held by SPY and MDY, the SPDR S&P 500 and Midcap 400 funds.  But below that we are seeing sectors and regions appearing on our radar.  A hint to a possible trend is the iShares MSCI Emerging Index Fund (EEM) climbing up to 14th place this morning.  Like EWM, that had been as low as the triple digits a couple of weeks ago but our users will remember doing very well with it when it ranked among the elite last fall.  Only time will tell if a similar shift away from the US is underway but ETF Global will keep you posted.

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