Annual Checkup -- EWY and IFN

These two odd birds in my portfolio are of a feather, so I'll consider them together. These are not individual companies, but EWY is the South Korean index ETF and IFN is the India Fund, a closed-end mutual fund of Indian stocks. (EWY or IFN for free RT quote). While I have positions in some mutual funds that have strong foreign exposure in the Third Avenue International Value Fund (TAVIX) and the Dodge and Cox Foreign Stock Fund (DODFX), I think international exposure in general is very important and I thought it made sense to commit a bit extra to these two countries. India and South Korean markets have been on a tear this year, so my positions are up by just about 30% each -- a little more in Korea, a little less in India (note that the big slip in IFN at the end of the year was due to a large dividend). I still think these two countries are in the sweet spot, but I believe in them for different reasons. The Korean fund I like primarily because I think Korea is still trading at an emerging market valuation even though the country's major corporations have really reached first world status. EWY is a great way for me to get exposure to Samsung, Hyundai, Posco, and the various big Korean banks that should have great success -- especially as their Chinese neighbors continue to expand vigorously and the Japanese economy rebounds. India is not as company specific -- I don't even know of many individual Indian companies aside from Infosys, but the economy is growing nearly as fast as China's but the population and the economy in India are much more reliable and stable, and as the world's largest democracy with a great education system I think their future is bright.

Being invested in these two bookends to China makes one consider why I haven't included a Chinese fund here. Though I have invested in some Chinese companies, I'm not so confident about the Middle Kingdom's ability to pull off this kind of growth without some serious upset, either political or economic, and I'm not so comfortable with their huge government ownership when the government's needs can conflict with those of individual investors. I think it's important to look for good Chinese companies, but I'm not as comfortable with "buying the country" in an ETF or broadly diversified CEF. At least, not now. I see no reason to adjust my foreign exposure this year, I'll be holding on to my IFN and EWY shares but don't plan to add any more at this point.

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