Singapore and Malaysia: Two Ways Investors Can Play the Region Between India and China
Stock-Markets / Emerging Markets Jul 24, 2011 - 06:10 AM GMTBy: Investment_U
Carl Delfeld writes: Located south of China and east of India, the booming Southeast Asian region is oftentimes overlooked by even the most sophisticated investors. The free trade pact between the regional grouping (ASEAN) and China inked early this year has led to a jump in trade and investment.
Leading my list like two turbine engines powering a jet plane, the Singapore and Malaysian markets have been working smoothly in tandem to give investors superior performance.
Formed in 1819 as a British trading colony and only one-fifth the size of Rhode Island, Singapore is perhaps the most strategically important global trading, finance and service nexus in Asia. Singapore is the busiest port in Asia, situated next to a vital trading channel, the Straits of Malacca.
The country has a well-diversified economy. Seventy percent of its GDP is attributable to finance and services. But what’s encouraging to potential investors is that some major firms are moving manufacturing centers from China to Singapore due to its infrastructure, logistics and laws protecting intellectual property.
For example, ExxonMobil, Royal Dutch Shell and Sumitomo are expanding petrochemical facilities. And strong global demand for transportation, communications and logistics services, increasing information technology spending, rising consumer spending and property prices, and expanded tourism all point toward continued growth.
Singapore will continue to fire on all cylinders if Asia-Pacific trade remains robust. It’s why you should explore the iShares MSCI Singapore Index Fund ETF (NYSE: EWS).
Malaysia: Potential Long-Term Growth
Next, Malaysia offers investors many of the same attributes of its southern neighbor, Singapore, with the added benefit of natural resources and lower wage levels. With U.S. interest rates at record lows and hot money pouring into fast-growing Asian markets, the Malaysia’s currency is trading at 13-year highs.
Malaysia is a constitutional monarchy a bit larger than New Mexico. Rich in natural resources and a natural gas and oil exporter, it offers investors an economic environment of low inflation and debt. It’s a solidly middle-income country with a per capita income north of $10,000, which is a little more than double that of China.
Its economy is nicely diversified. Although palm oil, tin, petroleum, copper, iron ore and other commodities are an important part of the Malaysian story, it’s well diversified with 50 percent of GDP attributed to the services sector, 40 percent to industry and 10 percent to agriculture.
Malaysia also has attractive demographics, with 32 percent of its population under the age of 15, 58 percent below the age of 30 and only eight percent over the age of 60. This is a sign of increased GDP growth in the future and potential growth in natural resource production and other commodities. On the other end of the spectrum, Japan, the third largest economy in the world, has only 15 percent of its population under the age of 15, a bad sign for future growth prospects.
Investors looking to capitalize on the potential long-term growth might want to consider the iShares MSCI Malaysia Index Fund ETF (NYSE: EWM).
In the near future, I’ll explore both of these countries a bit more and drill down to offer a few additional ways you can tap into their potential growth.
The World Has Changed Quickly
When people hear the words “emerging markets,” they immediately think of the BRICs, a term first coined only 10 years ago… But a lot has changed in just a short decade… Emerging growth is definitely also outside of Brazil, Russia, India, or China…
Smart investors have a new definition for this category… And that’s why it’s important for you to remember to look past the hyped “emerging market” fare of China and India, and to dig deeper than the front pages or editorial sections of the Financial Times or The Wall Street Journal.
It requires a lot of homework, but you’ll be rewarded for your time when you learn to recognize the potential of these alternative opportunities.
Good investing,
Carl Delfeld
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