ETFs: Hong Kong, South Africa, Brazil

10/10/2003 12:00 am EST


Ivan Martchev

Editor, Vital Resource Investor and Global Viewpoints

"Exchange-traded funds (ETFs) are the way to go when you want exposure to a major index," says Ivan Martchev in Personal Finance. "They're easy to buy and sell, there's no discount or premium to deal with, and they're widely traded. They are also ideal ways to play overseas markets." Here, the advisor recommends three foreign ETFs.

"Asia remains the hottest investment story of the new century, and China, with its rapidly growing economy and rapidly evolving manufacturing base, is the epicenter of Asian growth. And Hong Kong is likely to be the major beneficiary. The territory is a democratic, investor-friendly market and its leading companies are in a good position to profit from large investment interests on the Chinese mainland. But apart from its obvious relation to Mainland China, Hong Kong is an attractive market in its own right. The Hong Kong iShares (EWH ASE) offer broad ownership of the territory’s stock market and are a low-cost way to play the China growth story. Even better, the iShares offer a dividend yield of 3%. Buy below 10.20.

"Precious metals have been on fire this year, powering mining stocks to multi-year highs. And if there’s one country that’s leveraged to that trend it’s South Africa. South Africa is well known for its rich reserves of all sorts of precious metals and minerals including gold, silver, and platinum. That will be a real boon if, as we expect, precious metals and mining stocks continue to perform well. Of course, there are significant risks to investing in South Africa, so don’t bet the farm. But a yield close to 4% and a low valuation makes the country a worthy speculation. Accumulate South Africa iShares (EZA ASE) gradually below 50.

"The election of left-leaning Luis Ignacio da Silva as president of Brazil caused a lot of concern among the nation’s foreign investors. His campaign rhetoric had many believing the nation was about to default on its foreign debts; the bond and stock markets got crushed ahead of his election. But he remains committed to honoring foreign debts and has instituted investor-friendly reforms. The markets are now in recovery mode. But Brazilian stocks are cheap—the Brazil iShares (EWZ ASE) trade at a discount to sales and offer a yield close to 2%. Buy under 14."

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