Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Sorting Through Asian ETFs

Companies / Emerging Markets Nov 04, 2010 - 08:34 AM GMT

By: Ron_Rowland

Companies

Best Financial Markets Analysis ArticleYou shouldn’t be surprised if I tell you I like Asia. I talk about Asia frequently, both in my Money and Markets columns and in International ETF Trader.

The reason is simple: Asia is where I see the best growth in today’s globalized economy. You can find good opportunities in Latin America and a few other places, too. But Asia is the Big Kahuna! Every serious investor has to be involved there to some degree.


Investing in Asia has never been easier, thanks to the rise of exchange traded funds (ETFs). Yet I find that many investors are still reluctant — mainly because they’re confused. They look at all the Asia-related alternatives and just don’t know where to start.

Today my goal is to give you some answers. We’ll break down the list of Asia-focused ETFs into smaller bites that are easier to digest.

Just What Is Asia?

Every serious investor should consider Asia.
Every serious investor should consider Asia.

The first problem we run into is a definition: Exactly what constitutes Asia? Geologists will tell you that the regions we call Europe and Asia are really one big land mass called Eurasia. A big part of Asia is actually Western Russia. The capital is Moscow, which is back in Europe.

Also, what do you do with the Middle East? The Arabian Peninsula is connected to Asia but largely stands on its own, culturally and economically. And is Australia part of Asia?

We can quibble about these details, and indeed they are important. For investment purposes, though, Asia usually means China, India, Japan and the surrounding smaller nations. Sometimes you’ll see the term “Asia Pacific,” which is usually meant to include Australia and New Zealand.

All-Asia ETFs

Believe it or not, even with more than 1,000 ETFs on the market today, none of them provide all of Asia in a single fund. They all exclude something. The All-Asia ETF has yet to be invented.

The one that comes closest to fitting this description is BLDRS Asia 50 ADR (ADRA). It tries to include both developed and emerging markets, both Asia and Pacific, and even Japan. However, since it only invests in companies with U.S.-listed ADRs (American Depositary Receipts), only holds 50 of them, and is capitalization weighted, it doesn’t really provide a true picture of Asian markets.

Ex-Something

You may have seen funds or ETFs that claim to cover Asia and include “Ex-Japan” in their name. This means they exclude Japan. Why? It’s not because they think the country Japan is a bad investment — though that has been a good strategy with Japan for most of the past 20 years.

Japan is a bigger hill than many investors want to climb.
Japan is a bigger hill than many investors want to climb.

The problem is Japan’s stock market is so huge — relatively speaking — that it tends to “crowd out” attempts to cover the broader region. Investors have plenty of ways to get involved in Japan by itself, so most managers design their funds to include the rest of the Asia markets.

Many other Asia ETFs exclude emerging markets or developed markets, although it may not be obvious from their names.

Developed, Emerging, and Frontier

Once we get past the geography lesson, we can break down Asia further into developed, emerging and frontier markets.

Developed markets are the fully-modernized nations. Japan, Hong Kong, Australia, Singapore, and New Zealand are the only Asia-region countries in this group based on the MSCI classification system. They have extensive trading relationships with the Western world and integrated financial markets.

Currently just one ETF covers this group: Vanguard Pacific (VPL). Since VPL is capitalization-weighted, the allocations to the five countries are very skewed. Japan has a 62 percent allocation while New Zealand has less than half a percent.

Most ETFs that follow this category exclude Japan, for the reasons discussed above. The best strategy for long-term investors is to combine a good Japan ETF like iShares MSCI Japan (EWJ) with a regional ETF such as iShares MSCI Pacific ex-Japan (EPP). Since EPP excludes Japan, Australia is its largest holding at 65 percent of the fund.

Emerging markets are on the development road but not there just yet. China and India, while huge and very modern in some places, still have vast undeveloped areas. Ditto for many other countries in the region, even some big ones like Malaysia.

Emerging markets are full of contrast.
Emerging markets are full of contrast.

The emerging Asia niche is well-covered by ETFs. Take a look at SPDR S&P Emerging Asia Pacific (GMF) or First Trust ISE Chindia Index Fund (FNI).

One of my favorite ETFs representing Asia is a cross between EPP and GMF — iShares MSCI AC Asia ex-Japan (AAXJ). The “AC” in its name stands for all country, which means it includes both developed and emerging markets. As the name implies, AAXJ is also “ex-Japan.”

It excludes Australia and New Zealand as well, which is why the word “Pacific” is not in the name. AAXJ’s largest country allocations include China 26 percent, South Korea 16 percent, Taiwan 12 percent and India 12 percent.

Frontier markets are just now beginning to develop. They’re on the right track and have good long-term prospects, but they are not yet ready for “prime time.” The only ETF in this category is the single-country Market Vectors Vietnam ETF (VNM).

Asia A La Carte

Right now, I believe the best way to invest in Asia is to take small positions in several single-country ETFs. Japan, China, and India all have many to choose from, and I discussed the options for Australia and New Zealand last week.

You can customize your exposure with many additional single-country Asia ETFs. Consider iShares MSCI Hong Kong (EWH), iShares MSCI Singapore (EWS), iShares MSCI South Korea (EWY), iShares MSCI Taiwan (EWT), Market Vectors Indonesia (IDX), iShares MSCI Thailand (THD), iShares MSCI Malaysia (EWM), or one of the other single-country ETFs. Keep each holding small and be prepared to ride out any volatility.

In fact, that’s good advice for any international ETF. You never want to put all your eggs in one basket. Likewise, unless you are a trading pro you should probably not try to catch the short-term ups and downs.

Also keep in mind that trading hours in Asian markets have no overlap with U.S. markets. This means you need to be cautious about timing your entries — and your exits. One day can make a big difference.

Best wishes,

Ron

P.S. Be sure to check out tonight’s Money and Markets TV show: What’s Beyond the Third Quarter Earnings Reports? Tune in tonight, November 4, at 7 P.M. Eastern time (4:00 P.M. Pacific). Simply go to www.weissmoneynetwork.com and follow the on-screen instructions. Access is free and no registration is required.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules