In the last year more than a few notable market strategists, economists and investing luminaries have all pointed to one region of the world to continue growing – Asia. Asia is can mean different things to each person. So, lets be clear we are not talking Japan or India. We are talking Malaysia, Thailand, Vietnam, South Korea, Philippines, Indonesia, Singapore and the like. Note I did not include China as it is an entity onto itself. Keep in mind that on January 1st, 2010, China and 10 Southeast Asian nations (combined GDP of over $1 trillion) launched the world’s third-largest free trade area.
Items to look at
When considering an investment in Asia first you must consider if you want specific country exposure or regional exposure. For the purposes of this post I will look at country specific exposure. Regional exposure gives you a heavy dose of China at the slight of other stable, viable countries. The next step is to look for countries with stable governments, trade surpluses, strong local economies that are not overly export driven, and foreign currency reserves.
Even though the markets are shaky at the moment a good investor will have an idea of where to invest when conditions warrant. Each of the below funds are above their 200 day EMA but trending lower with global markets. Here are a few examples:
Malaysia
The iShares Malaysia ETF (ticker EWM) is a well balanced ETF. Many single country ETFs have large positions in particular stocks or in a particular industry like finance, not EWM. EWM’s top five sectors are 30% financials, 18% industrials, 14% consumer staples, 12% consumer discretionary and 12% utilities. Islam is the largest official religion in Malaysia and the banks are very conservative being careful to avoid derivative investments. Since Independence from the British, the country has been a Parliamentary democracy with a stable government. Malaysia is also a world leader in the production of palm oil – a cheaper substitute for cooking vegetable oil. In addition to palm oil and rubber, Malaysia is blessed with an abundance of forestry, fertile land where tea is harvested. To cap it all off Malaysia has a trade surplus of $36 billion and $96 billion in foreign exchange reserves and gold. The Malaysia play is on an underrepresented, conservative, emerging market that stands to benefit from the ASEAN trade agreement.
Indonesia
The Market Vectors Indonesia ETF (ticker IDX) is another well balanced ETF. IDX’s top five sectors are 25% financials, 24% materials, 15% energy, 11% consumer discretionary and 12% consumer staples. Indonesia is the 4th largest population on the planet and the 3rd largest democracy. Indonesia is the only Asian nation that is a member of OPEC and like Malaysia is predominately Muslim lending to stable banking. The country also has a trade surplus of $29 billion and foreign currency and gold reserves of $62 billion. As an added bonus Indonesia is also a member of the G20. The only other Asian nations that are members of the G20 China and India. Indonesia has a robust economy and with exports of oil, gas, palm oil, textiles and rubber. Another interesting aspect of Indonesia is its distance from the developed world stock markets. Much of the economy is close to the ground meaning local economy. Therefore, global economic downturns are not quite as harsh on their economy.
South Korea
The iShares South Korea ETF (ticker EWY) yet another well balanced Asian ETF. EWY’s top five sectors are 29% technology, 16% financials, 14% industrials, 13% materials and 12% consumer discretionary. South Korea enjoys one of (if not the highest) per capita GDP of any emerging market nation at $27,700. Additionally, South Korea is a world leader in ship building, automobile manufacturing and steel manufacturing. Where South Korea really shines is in the world of high technology. According to the Economist Intelligence unit, in 2007, South Korea ranked third in the world in IT competitiveness. The country also has a trade surplus of $41 billion and foreign currency and gold reserves of $245 billion.
Charts courtesy of StockCharts.com
Disclosure Statement: ETFGPS is a blog that Navigates The World of ETFs. Sustainable Investment Strategies LLC is a Registered Investment Adviser in the State of Maryland, and does not hold positions in any of the above mentioned ETFs at the time of writing. Investors who are interested in money management services may visit the Sustainable Investment Strategies LLC web site