Posted on 08/10/2012
According to the MSCI Emerging Market classification, Malaysia is categorized as an Emerging Market country, which is a designation that typically carries the association of higher volatility, instability, and higher betas. However, Malaysia is an exception, as it offers lower volatility and a lower beta than most Emerging Market countries. Based on the latest calculations, the iShares MSCI Malaysia Index Fund (EWM) possesses a beta of 0.83, which is less than than the market's beta of 1. This suggests that EWM will react to a lesser extent than the average up or down moves of the market, which can hurt in strong up markets but help in down markets.
When compared to other Emerging Market ETFs, this lower beta suggests lower perceived risk. When we look at the betas of the BRICs (Brazil, Russia, India, and China), we find that EWM has a lower beta than all four. Brazil (EWZ) has the highest beta of 1.36 while the lowest beta amongst the BRICs is India (INDY) of 1.10. Meanwhile, China (FXI) has a beta of 1.35. As well, EWM offers a lower beta than the Emerging Market space (EEM), which has a beta of 1.35. When we look at the volatility of these funds, we find that EWM has a lower standard deviation than the BRIC ETFs and the EEM, and is barely above the IYY, and this has been the case for a couple years now. So, not only does EWM offer a lower beta, or risk, it also offers lower volatility.
In addition, for those seeking higher yielding and income opportunities in the equity space, the iShares MSCI Malaysia ETF (EWM) offers a yield of 3.73%. As an equity income opportunity, EWM can provide exposure to the Emerging Market space in a low volatility fashion.