Four Diversified Plays On Asia

As U.S. equities continue to show signs of instabilities due to fears of crippling debt, deflation and high unemployment, many have turned to alternative regions, in particularly Asia to seek returns.

When speaking of Asia, the first nation to come to mind is China, but there are many more nations that are likely to continue to outperform the world’s second largest economy.  As a region, Asia has drawn attention due to its large growth rates, insatiable demand for commodities, cheap labor and increasing private consumption. 

 Take Singapore for example, whose economy grew at a seasonally adjusted 18.1% in the first half of the year and is benefiting from China’s stellar growth.  The region has been able to pull themselves up by their boot straps, mainly due to fiscal stimulus plans, which accounted for nearly 4% of GDP, and were higher than any other region of the world. 

Government stimulus packages have been successful in Asian nations due to low consumer debt, and a high propensity to save.  This way of life has lead these nations to further develop and enable incomes to rise, which will likely cause the domestic demand for goods and services to increase as well.   In fact, demand from domestic consumption is expected to add nearly 7% to the growth rate of the smaller emerging nations of Asia. 

To further add to the regions attractiveness, most nations have kept unemployment rates relatively tame, many big technology companies in the region are increasing capital-expenditure projections, and the International Monetary Fund (IMF) has openly stated that it expects the region as a whole to continue to grow. 

Lastly, China and Taiwan recently signed the Economic Cooperation Framework Agreement (ECFA), which will remove tariffs on 539 Taiwanese products within three years and improve trade between China and Taiwan, further strengthening the region.

Gaining diversified access to the region is relatively easy through the following ETFs:

  • PowerShares FTSE RAFI Asia Pacific ex-Jp (PAF), which allocates 34.5% of its assets to South Korea, 14.9% to Hong Kong and 7.5% to Singapore.  PAF closed at $47.01 on Friday.
  • SPDR S&P Emerging Asia Pacific (GMF), which allocates 35.6% of its assets to China, 28.2% to Taiwan, 20.3% to India and 6.2% to Malaysia.  GMF closed at $77.63 on Friday.
  • iShares S&P Asia 50 Index (AIA), which allocates 28.6% of its assets to South Korea, 22.6% to China,  21.1% to Taiwan, 17.3% to Hong Kong and 10.3% to Singapore.  AIA closed at $40.69 on Friday.
  • iShares MSCI All Country Asia ex Jpn Idx (AAXJ), which allocates 27.2% of its assets to China, 17.4% to South Korea, 13.3% to Taiwan, 11.6% to Hong Kong and 11.6% to India.  AAXJ closed at $56.97 on Friday.

 

When investing in these equities, it is important to consider factors that could potentially hinder economic growth and prosperity in these nations, such as economic bubbles in China and tensions between North and South Korea.   A good to way to protect against these factors as well as the inherent risks involved with investing in equities, is through the use and implementation if an exit strategy which triggers price points at which an upward trend in gold could potentially be coming to an end. 

According to the latest data at www.SmartStops.net, the price points for the aforementioned ETFs are: PAF at $45.87; GMF at $74.44; AIA at $38.49; AAXJ at $54.86.  These price points fluctuate on a daily basis and reflect changes in market conditions.  Updated data can be found at www.SmartStops.net.

Disclosure: Long PAF

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