While the U.S. economy deals with Ls, Ws and square root shapes, South Korea has more than its share of positives. For instance, it is one of a select few countries with positive percentage gains in industrial production with an astonishing 11% growth rate (September).
Granted, industrial production is only a portion of GDP; specifically, it accounts for the output in manufacturing, mining, and utilities. Nevertheless, it is a popular economic metric for the forecasting of future well-being.
And there's more.
South Korea's currency has been weak enough to help the export-dependent country, but not so weak as to arouse the ire of its neighbors. (The Chinese yuan's weakness is seen as a far bigger fish in need of frying.)
Moreover, much like the U.S. Federal Reserve, the South Korean Ministry of Finance is not yet signaling a change in interest rate policy, so there's plenty of stimulus keeping South Korea on track. Unlike the U.S., however, South Korea is near full employment and its country's deficit spending isn't causing worldwide alarm.
Unfortunately, there's only one pure South Korea ETF and... 20% of the iShares South Korea (EWY) belongs to the direction of Samsung Electronics. Single country ETFs frequently have too much riding on the success (or lack thereof) in one company. That's why I tend to favor getting regional exposure to Asia through a fund like iShares MSCI Asia excl Japan (AAXJ).
AAXJ has 20% in South Korea... but you also get a fair bit of China, India, Hong Kong and Taiwan. AAXJ has less volume, which can be tricky for some traders. Yet regional diversification is important enough to justify paying a bit more in annualized expense and/or price execution.
Whereas noteworthy weakness it South Korea's currency, the won, has helped the nation emerge from the global recession quickly, the strong has hindered Old Europe's economic positioning. Projections for Euro-area GDP growth for 2010 are less than the projections for North America, South America or Asia.
Nevertheless, both France and Germany have been leading the economic recovery for countries in the Euro area. That's why it comes as a bit of a surprise to see iShares France (EWQ) and iShares Germany (EWG) popping up on a value screen.
For instance, I screened for the following 3 criteria:
1. Dividend yield greater than the current 10-year U.S. treasury
2. Price-to-book (P/B) ratio less than 2.0
3. Average daily volume in excess of 100,000 shares
Here's what I uncovered:
|5 ETFs With Strong Dividend Yields and Low P/B Ratios|
|Annual Div Yield %||P/B|
|iShares MSCI EAFE Value Index (EFV)|
|iShares MSCI France (EWQ)|
|SPDR Select Utilities (XLU)|
|SPDR International Real Estate (RWX)|
|iShares MSCI Germany (EWG)|
Not a whole lot has changed for value investing since mid-July. For those that look in the valuation direction... as opposed to momentum/risk/growth direction... the biggest sector steal is utilities. The SPDR Select Utilities Fund (XLU) and the Vanguard Utilities Fund (VPU) are suitable means for gaining access.
The 4 other possibilities above highlight the apparent value that may exist in Old Europe. Granted, rising unemployment is hurting consumer demand, while the strong euro slams French and German manufacturers. Industrial production (September) in France and Germany was down -10.4% and -12.8% respectively. (Review the importance of industrial production data in this feature about South Korea.)
Nevertheless, for those who are long on value and patient on time... iShares France (EWQ) and iShares Germany (EWG) may have something to offer. The YTD gains are certainly commensurate with the U.S. S&P 500 SPDR Trust (SPY).
If you'd like to learn more about ETF investing... then tune into In the Money With Gary Gordon. You can listen to the show LIVE, via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log (blog) that makes the world of ETFs easier to understand. The content does not represent investment advice, nor are the securities discussed suitable for every investor. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.