Asian ETFs With Resilience

 | Sep 01, 2012 | 12:30 PM EDT  | Comments
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Stock quotes in this article:

VNM

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phi

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ASEA

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tlk

For a time, when I began writing here at Real Money, I covered international stocks, including those from emerging markets. In recent months, as you can guess, emerging-market names have not shown up on my leading stock screens.

However, I have continued to track some of the international exchange-traded funds. While many have broken down technically, some are showing some resilience -- or, at least, they are mustering up the strength to hold up near key moving averages.

The iShares MSCI Philippines ETF (EPHE), for instance, is off its early July high, but it's holding above its 200-day moving average. This ETF is up nearly 22% year year to date despite a 4.2% skid this month.

VNM has a dividend yield of 1.1%. Its only U.S.-listed Philippine-based holding is telecom Philippine Long Distance Telephone (PHI), wth its top holdings consisting of overseas-listed shares.

If we look at the American depository receipts (ADRs), available to U.S. buyers, we see daily trade is choppy. That's due in part to currency exchange rates. A weekly chart smoothes out the action, though. Technically, they are holding up fairly well, forming what appears to be a classic cup-and-handle pattern. That can be a good indicator.

I also use short-term moving averages as trading indicators. In that light, the stock looked promising early in Friday's session. It vaulted above its five-day exponential line, and currently could be in a buy zone.

However, the fundamentals are lacking. The company has reported four quarters in a row of earnings declines, and it is expected to deliver earnings of $4.01 per share for 2012 -- a year-over-year drop of 14%.

Another Asia-Pacific ETF that is holding up fairly well is the Global X FTSE ASEAN 40 ETF (ASEA), which tracks its eponymous index.

ASEA is showing a year-to-date gain of 13%, to $16.24, though it has traveled a rocky road to get there. This is a new ETF, having made its debut in February 2011, and it continues to sport some erratic intraweek trade. It notched sizeable price gains in June and July, and has eased about 0.3% in August.

ASEA's largest holding is Indonesia's Astra International, a conglomerate active in the automotive, financial, and information technology sectors, among others. The stock is not available as a U.S.-listed ADR.

However, one ADR holding within ASEA is another Indonesia-based company, Telekom Indonesia (TLK). This is one of those stocks that has not made it onto my top growth screens because of some fundamental weakness, but it has been a strong technical performer.

Let us start with the fundamentals: Telekom Indonesia has shown some erratic earnings growth, reporting earnings per share of $0.69 per share in the most recent quarter. That is down 9% from a year earlier. Earning growth had been flat in the previous quarter. The pace of revenue growth has also slowed, with the company reporting declines in the past two quarters.

The chart, however, tells a better story. The stock is up nearly 26% so far in 2012, with June and July having been particularly productive months. It has been consolidating recently, holding just below its five-day exponential line, and well above its 50-day. The ADR is relatively thinly traded, moving about 314,000 shares per day, on average. It is in a possible buy zone at the moment, but potential investors and traders should use caution because of the stock's frequent tendency to gap higher or lower.

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