iShares MSCI Malaysia ETF

EWM

Market cap $247M

It has been 225 days since President Trump's Inauguration on January 20th, and the S&P 500 entered today up 8% since the last close before the Inauguration. Speaking of the G7, the US has been the worst market among these seven developed nations since Inauguration Day in January. Along with being the second-best performing country ETF since Inauguration Day, Vietnamhas easily been the best performer since April 8th with a gain of 77.5%.

Malaysia faces a real risk of a middle-income trap due to stagnant wages, brain drain, and over-reliance on depleting oil revenues. Despite attractive valuations and a diversified economy, structural challenges and weak wage growth limit upside for the iShares MSCI Malaysia ETF. Financials dominate EWM's portfolio, offering stability, but sector concentration and a weak ringgit highlight broader economic vulnerabilities.

EWM which focuses on 30 stocks from Malaysia is up by only low single-digits this year, and underperforming emerging markets and global markets quite significantly. We now feel EWM could witness better prospects ahead. Malaysia's macro outlook is stabilizing, with improved GDP growth, supportive government policies, and central bank rate cuts boosting domestic demand.

iShares MSCI Malaysia ETF offers investors exposure to some of the largest firms trading on Malaysia's stock market. Almost 60% of its holdings are established banks and utilities, with zero technology firms, lessening the possibility of significant outperformance. The ETF is hardly cheap based on a price-to-earnings ratio of 15x, particularly by emerging market standards.

Investing in Malaysia via the iShares MSCI Malaysia ETF (EWM) offers potential but carries significant risks due to its 45% exposure to the financial sector. Malaysia's economy is stable with low credit default swap premiums, a non-inverted yield curve, 4.4% GDP growth, low unemployment, and controlled inflation. Political stability and favorable policies, including investments in green energy and fiscal responsibility, support a positive outlook for EWM.

Topping the list and outperforming in that span have been emerging market countries like Brazil and India, which are both up well over 6.5%. International ETFs don't only have momentum on their side, but they also offer higher yields than the US at the current moment. Across all 22 ETFs, the average yield stands at 3.25%.

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ASEAN economies are expected to maintain steady growth despite global macro headwinds, with Malaysia poised to benefit from higher commodity prices and geopolitical shifts. Historical trends show ASEAN countries gained from a China-centric trade war, with companies seeking lower-cost manufacturing sites shielded from tariffs. Malaysia's economic outlook is positive, benefiting from higher commodity prices and potential geopolitical advantages if tariffs continue to target China.

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The iShares MSCI Malaysia ETF is risky due to concerns about the Ringgit, Trump tariffs, and a weaker Chinese economy. Financials and utilities dominate EWM, with Ringgit value and NIMs under pressure from tariffs and inflation complacency, which would affect USD denominated investors. High expense ratios (0.5%) also have to be contended with, assuring some return shaved off earnings yields of around 6.6%, which aren't that high compared to 3% benchmark rates there.