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Malaysia Moves Reveal Risks, Opportunity with International ETFs

This article was originally published on ETFTrends.com.

The Malaysia country-specific exchange traded fund has experienced wild swings in the last couple of sessions and allowed U.S. investors to price this Southeast emerging market even during this foreign market's off hours.

The iShares MSCI Malaysia ETF (EWM) jumped as much as 4% in earlier Thursday trading after plummeted 6% Wednesday, and it is now testing its long-term support at the 200-day simple moving average.

The Malaysia ETF reveals the strong U.S. trader interest in international stocks as many look to capture potential overseas opportunities.

“EWM is serving as a real-time price discovery vehicle for investors while local Malaysian markets remain closed until Monday, as evidenced by record volume yesterday,” Chris Dhanraj, head of U.S. iShares investment strategy for BlackRock, told Bloomberg.

Yesterday investors traded 4.4 million shares of EWM, with volume spiking nearly 900 percent above its five-year average. EWM traders exchanged another 4 million shares Thursday, compared to the average daily volume of 700,000 shares, according to Morningstar data.

U.S. investors may gain exposure to overseas markets through various country- or region-specific ETFs. However, these U.S.-listed international stock ETFs may not trade during normal working hours in the respective international markets. For instance, traders have used EWM as a way to receive real-time price discovery while the underlying Malaysian markets are closed. Consequently, EWM was trading at a 5.35% discount to its net asset value at the end of Thursday.

Potential investors interested in gaining international exposure should then seriously consider limit orders to better efficiently price trades.

The Malaysia ETF rebounded after losses tied to an upset election win. Assuaging market fears, the newly inaugurated Prime Minister Mahathir Mohamad said he will address concerns about the economy, with state finances and economic management as his priorities.

Furthermore, Mahathir, who previously served as prime minister for 22 years ending in 2003, said he’s seeking an active stock market and an increased overall market capitalization, adding there shouldn’t be any need to devalue the Malaysian ringgit currency.

For more information on the developing economies, visit our emerging markets category.