mal" style="margin-bottom:12.0pt;text-align:justify;line-height:
normal;mso-pagination:none;mso-layout-grid-align:none;text-autospace:none">Taiwan (EWT) is up sharply
this year fueled by better relations with China, an uptick in tech, and an
overall recovery in emerging markets. Not long ago during the late 1980s and
1990s, Taiwan was recognized as one of four Asian Tigers (along with Hong Kong,
Singapore and South Korea) and referenced as the “Taiwan Economic
Miracle."

Compared to its sibling, Hong
Kong, Taiwan seemed more autonomous from mainland China in many people's minds,
despite political controversy over its status. However, after the IT bubble
burst in 2000, many businesses left Taiwan to invest and even live in mainland
China.

As a result, Taiwan’s economy
shifted into a lower growth trajectory and investors took notice. Here is a
surprising fact. In 1990, Taiwan's GDP was about the same as that of China, but
today, it is less than one-tenth of China’s GDP.

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Like Japan, Taiwan suffered
through a "lost decade" and many sectors suffered though  semiconductor companies still grew
nicely and the industry went global in a big way.

It seems that better relations
with the mainland and especially the hope for more investment flows into its
markets and the flow of talent and ideas may be coming home. Tourism is also a
key driver of growth. In many ways the quality of life is better in Taipei than
in cities like Shanghai and this together with more open cross-strait travel
(45 minute trip) may lead to Taiwan becoming more of an executive base for he
greater China region for foreigners and Taiwanese alike.

Taizo Ishida 
Portfolio
Manager with
Matthews International Capital Management, LLC recently stated
that their interest in domestic Taiwanese companies is increasing. The
political side of the Taiwan China equation is critical. Ties have begun to improve following the
election of new president Ma Ying-jeou earlier this year on a more pro-Beijing
platform. Investment restrictions have been relaxed and direct flights have
commenced.

Taiwan is a wealthier, more developed
economy than Malaysia and is still a key player in global technology. As long
as this rapprochement continues, Taiwan’s prospects could continue to steadily improve.
The Chinese have smartly decided to incrementally break down latent Taiwanese
independent attitudes by dangling economic riches and opportunities to advance.

All of these developments have made the
Taiwan market perhaps the most expensive in the world on a price to earnings
basis. Much depends on where the Chinese economy and markets end up through
2010. I have to think there will be a better entry point further down the road.
The most widely used is the iShares MSCI Taiwan (EWT) ETF. Keep in mind that
consistent with the tech-heavy nature of the Taiwanese economy, the index is
somewhat lopsided; technology comprises more than 55% of the basket, with
financials a distant second at 15%.

Malaysia (EWM) also made tremendous progress during the eighties and
nineties, culminating in the region-wide bubble and crash that was the Asian
crisis of 1997.

Since then, Malaysia has become a solid middle-income country that, while
losing some mid-end manufacturing work to China, has improved its financial and
service sectors. The new prime minister Najib Razak recently announced a number
of measures to liberalize the financial sector, with the goal of growing the
service-based economy; in particular, there is a long-standing aim to make
Kuala Lumpur a key hub for the fast-growing Islamic finance industry.

In addition, Malaysia has been working more closely with long-time
rival Singapore and neighbor (which was briefly a part of Malaysia after
independence before breaking away in 1965) is benefiting both countries but
especially Malaysia that is gaining the patina of Singapore’s brand of quality.

One of the key attractions to Malaysia is its balanced economy. The iShares
MSCI Malaysia ETF (EWM), which looks reasonably balanced; financials account
for around 30% of the index, followed by industrials (20%), consumer staples
(15%) and consumer discretionary (13%).