Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

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