iShares MSCI Singapore Index Fund (ETF) (EWS)

Sometimes I just love to be a contrarian and swim upstream, so here goes...





Singapore has a strong medium-to-long-term economic future, with plenty of just brilliant intellectual and white collar capital available there, and a very strong work ethic. But EWS has way too much exposure to financial firms at a time like this. The US housing, financial, and automobile markets (among others) have sneezed -- repeatedly -- and many countries throughout the world are catching a cold. And with the Goldman Sachs forecast today that top US banks will have losses TWICE as big as previously thought, well, I don't believe we've seen the bottom in the US, folks. Not even close.





2008 is going to be pretty rocky for plenty of sectors of the US economy, and there's no way that doesn't hurt the world economy. It's just a question of how much, how fast, and which countries / regions are most exposed to such losses. Oil exporting countries like Russia, the OPEC countries, etc., have a substantial hedge in place. But Singapore is not an oil exporting (or producing, for that matter) country. The Communist Chinese will hedge by continuing to artificially manipulate the value of their currency to be weaker as long as the US Dollar weakens. I believe that Singapore does not have this option, and things are more truly controlled there by market conditions.





But with the current gigantic US trade deficit, that means we have been importing and consuming a huge amount of goods, services, and resources from abroad. That's going to slow down some more on the whole. And with the incredibly weak US dollar, the comparative value of outsourcing business to East Asian countries like Singapore isn't what it once was. Heck, I hear that some big companies are moving to reverse-oursource things back to the US! It's a strange time we are living in.





I'm no Singapore expert, and certainly a CAPS player like weiwentg must know a lot more about the place than I do. (See his highly informative bullish pitch from April 2007.) But I think the next 6-12 months won't look too good for the USA, for EWS, or for most of the global economy. Ouch. Underperform.