As a kid I would watch my father read the newspaper many evenings. Sometimes he would catch me staring and impart on me some bit of news that he thought I might find interesting. The best tidbit of advice he ever gave me about the news was that the big headlines tell history and the side stories tell the future.

Today’s side stories

Looking through the news today you find side stories about China importing more oil from Saudi Arabia than the US, US banks selling assets in Asia, the growing consumer economies in Asia, real estate being scooped up in Singapore by Russian oil money, Asian nations flush with sovereign wealth, and much more. Many of today’s side stories are pointing east.

Going East

In my last post I wrote about playing Asia through investing in particular emerging countries that hold promise in the area. If you do not want to delve into emerging market investing but still want to benefit from Asia’s growth then you can look to developed stable, Pacific nations like Australia, New Zealand and Singapore. Even if you are investing in Asia’s emerging markets investing in the stable, western markets in the area could work nicely.

Australia

If you have ever been to Australia you know how difficult some of the land is to navigate. The same can be said of trying to navigate your investment options when it comes to ETFs with Australia exposure. First, why consider investing in Australia? If western countries, Australia is the only country who’s economy did not technically go into recession in the recent financial crisis. Avoiding recession is not a reason to invest but why the country did not go into recession is certainly one of the many reasons. Australia had (and still does) many things going for it leading into the global downturn. The first, a very stable financial sector. According to the World Economic Forum’s “Financial Development Report,” Australia is ranked 9th in the world for financial stability (United States ranked 38th). Sydney Morning Herald writer, Ross Gittins, put it well in an article last year when he wrote;

One of our greatest strengths compared with the Americans, British and other Europeans is that although some of our lesser financial institutions have failed, our banks have been rock solid. The trouble facing most of the rest of the developed world is because their banks are in trouble.

Howard (Prime Minister) and Costello (Former Treasurer of Australia) deserve the credit for this. They resisted pressure from our big four banks to allow them to merge and become ”national champions”, continuing their predecessors’ Four Pillars policy and thus helping to keep our banks out of trouble.

Just as importantly, Costello completed reform of the regulation of our financial sector, placing prime responsibility in the hands of the Australian Prudential Regulation Authority. Part of the Americans’ problem is that responsibility in their system is shared between four or five buck-passing authorities.

Some experts believe that what kept Australia out of recession is that fact that nine percent of every dollar earned by Australian workers goes into a fund called a superannuation fund. The superannuation fund is a vast pool of domestic money that the can be used for investment. As well, all through the crisis Australians were adding to the pool of money. That is not saying share prices in Australia did not fall or that the country is perfect, but they do have a mature savings market.

Last, Australia is a commodities powerhouse. Australia is one of the worlds leading exporters of coal, iron ore, meat, gold, wool and more.  Major trading partners include Japan, China, South Korea, US, New Zealand, and India.

Singapore

Singapore sits at the tip of the Malay peninsula and right the middle of the Asian trade routes. Singapore is a highly modern city-state that has its fingers in world trade, finance and manufacturing. Singapore also sits on one of the largest sovereign wealth funds in the world. According to the World Economic Forum’s “Financial Development Report,” Australia is ranked 5th in the world for financial stability. Singapore stands to benefit from a flourishing Asia through its vast shipping industry, financial industry and export economy.

Between Australia and Singapore an investor can have exposure to natural resources, strong banks, shipping, and stable economies. While the US and Europe sort out their debt problems there are still strong, stable, western economies that can anchor a portfolio.

Free Research

Attached you will find a comparison of funds with exposure to Australia along with funds that have significant exposure to Australia along with other countries. Click here for the COMPLIMENTARY REPORT.

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

You remember the cheer for the Australian athletes from the Sydney Olympics.  There are certainly some cheers going up for the Australian stock market.  Not only is the Australian stock market turning in solid performance take a look at the currency. Oh did I mention that the Australian economy is the only advanced economy to avoid recession in 2009.  Wow!  That is a major accomplishment.  Don’t get me wrong it is not all roses in Australia’s economy.  They have stimulus packages, employment issues and falling imports. But…

The Goods

Besides being a stunning beautiful country Australia is loaded with natural resources and is geographically well situated.  Australia is one of the worlds leading exporters of coal, iron ore, meat, gold, wool and more.  Major trading partners include Japan, China, South Korea, US, New Zealand, and India.  What you may notice from the line up of major trading partners is that Australia is mighty close to China and India and South Korea all of which are fast growing economies with loads of promise.  Being rich in hard and soft commodities have been a boon for the Australian dollar as commodities have enjoyed significant strength in recent years and is expected to continue.

ETF Plays

A direct play on Australia would be the iShares Australia (ticker EWA).  EWA is up 45.81% ytd and is well above both its 50 and 200 day EMA.  The fund’s single biggest holding is BHP Billiton at 15.5% of the portfolio.  The largest sector in the fund is financial companies at 41.5% of the portfolio.  Keep in mind that the financial companies in Australia are in an enviable position so close to the fastest growing economies in the world.  It is no coincidence that ANZ Bank of Australia was given permission to open a wholly owned subsidiary in Hanoi, Vietnam a very fast growing economy.

Charts courtesy of StockCharts.com

For significant Australia exposure and more look at iShares MSCi Pacific ex-Japan (ticker EPP).  With EPP you are getting a fund with approx. 65% in Australia, 21% in Hong Kong, and 11% in Singapore.  Here again your top holding is BHP Billiton and financial companies are the biggest sector at approx. 45%.   EPP is up 43.87% ytd and is well above its 50 and 200 day moving average.

Full 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 hold positions in the EPP ETF at the time of writing. Investors who are interested in money management services may visit the Sustainable Investment Strategies LLC web site.