...the PH Market in Focus

Top Ranked Philippines ETF in Focus: EPHE - ETF News And Commentary

 

 

 

By Zacks.com

NASDAQ

January 23, 2013

The Philippines is one nation which has been able to outperform other emerging markets in the recent past. This strength has been attributed to a solid consumer market and booming exports thanks to a weak currency.

 

This combination comes at a great time, as most of the developed economies are in the doldrums, leaving many emerging markets to fend for themselves ( Buy These Emerging Asia ETFs to Beat China, India ).

 

This has been no problem for the Philippines as the country has shown incredible resilience to the global turmoil, posting a solid GDP growth rate. In the third quarter, the region delivered a robust growth rate of 7.1%. This is much better than the GDP growth of 6% posted in the second quarter.

 

Meanwhile, in an effort to cut interest expenses and shore up its financial position, the Philippines government recently announced the repurchase of $1.46 billion in dollar and euro denominated bonds.

 

The initiative by the government can be viewed as an effort to improve the investment grade credit rating and further show that the country is an economic power in the region ( Philippines ETF: A Rising Star in Emerging Market Investing ).

 

Rating agencies have taken note as well, as in early 2012 S&P bumped the country's long-term foreign currency-denominated debt to BB+ from BB, the highest rating since 2003. This does not end here with Moody's lifting its outlook on the economy to positive.

 

Clearly, the trends are continuing to be positive for the country, suggesting that some might want to consider the area for investment. One way to do this in basket form is via the MSCI Philippines Investable Market Index Fund (EPHE) which currently has a Zacks ETF Rank of 1 or 'Strong Buy'.

 

We expect it to outperform its peers over the next year and continue to be a solid pick for emerging market ETF investors. Given this, the product could be worth a closer look by investors seeking exposure to this economy.

 

About the Zacks ETF Rank

 

The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors. ETFs are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive one of three risk ratings, namely Low, Medium, or High.

 

The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks Rank reflects the expected return of an ETF relative to other products with a similar level of risk.

 

For investors seeking to apply this methodology to their portfolio in the Philippines market, we have taken a closer look at the top ranked EPHE below:

 

MSCI Philippines Investable Market Index Fund ( EPHE )

 

The fund tracks the MSCI Philippines Investable Market Index, which looks to offer investors a broad exposure to equities listed in the Philippines ( Do Corrupt Countries Make for Great ETFs? ). The fund trades with an asset base of $221.4 million and volume of more than 0.4 million shares a day.

 

The performance of the ETF has been quite remarkable. This ETF has added about 30.8% so far and it has gained roughly 39% over the last 52 weeks. Meanwhile, the yield of the fund stands at 0.96% while costs come in at 59 basis points a year ( Emerging Markets Dividend ETFs for Income, Growth & Diversification ).

 

Currently, the product has just over 42 securities in its basket. Maximum sector exposure is to Financials (41.6%), Industrials (25.0%), and Utilities (10.3%).

 

investors should note that the fund is concentrated in the top 10 holdings with more than 55% of investment. Among individual holdings, SM Investments Corp, Ayala Land and SM Prime Holdings take the top three positions with 10.4%, 8% and 6.3%, respectively, of EPHE's assets.

 

Clearly, despite the heavy financial exposure, the product has not been hampered by the European crisis, suggesting it could be an interesting choice for those looking for an ETF that is not heavily correlated to the euro zone, which still has the chance to be a strong performer.