How Asia Offers Regional Emerging Market Opportunity

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Six of the 10 most populated countries in the world are in Asia, and the continent holds more than half of the world’s population. The second- and third-largest economies in the world, as measured by Gross Domestic Product (GDP), also are in Asia. The mix of frontier, emerging and developed economies in Asia creates a geographic region with an enticing combination of raw materials, markets to sell goods and both cheap and skilled labor. Exchange-traded funds (ETFs) that you can use to invest in Asia include: iShares Asia / Pacific Dividend 30 Index Fund (DVYA), SPDR S&P Emerging Asia Pacific ETF (GMF), SPDR S&P Small Cap Emerging Asia Pacific ETF (GMFS) and FTSE ASEAN 40 ETF (ASEA).

This set of funds is tied to a region that offers big economic potential. The funds also are among a wide variety of country-specific and Asia-area offerings.

DVYA seeks to track the results, before fees and expenses, of a non-diversified index of high-dividend-paying equities in Australia, Hong Kong, Japan, New Zealand and Singapore. Its top 10 holdings make up 44.1% of the fund’s total assets; the top holding is Telecom Corporation of New Zealand Ltd. This fund is most heavily invested in communication services, 21.62%, and financial services, 21.18%. DVYA has gained 8.32% this year, and it offers a yield of 5.18%.

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GMF seeks to replicate the performance, before fees and expenses, of a market-capitalization-weighted index of emerging markets in the Asia-Pacific region. Its top 10 holdings make up 21.24% of GMF’s total assets; its top holding is Taiwan Semiconductor Manufacturing Co Ltd. This non-diversified fund is heavily invested in the technology sector, 26.48%, and financial services, 22.46%. Year-to-date, GMF has gained 10.10%. It has a small yield of 1.48%.

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GMFS is a non-diversified fund that seeks to replicate the performance, before fees and expenses, of an index of small-capitalization companies domiciled in emerging Asia-Pacific markets. Small capitalization is defined here as a market capitalization of less than $2 billion U.S. dollars. GMFS’ top 10 holdings represent 8.91% of its total assets; the fund’s top holding is Tata Motors Ltd, 1.30%. The top sector holdings of this ETF are technology, 24.15%, and consumer cyclical, 16.37%. GMFS has gained 9.26% this year and has a yield of 3.42%.

ASEA seeks to replicate, before fees and expenses, the performance of an index of the 40 largest and most liquid companies in five Southeast Asian countries: Singapore, Malaysia, Indonesia, Thailand and the Philippines. ASEA’s top 10 holdings make up 46.37% of the fund’s total assets; its top holding is DBS Group Holdings Ltd, 6.41%. ASEA is largely invested in the financial services sector, 43.32%. This ETF has gained 11.23% this year, and it has a yield of 3.53%.

ASEA_071614

The resurgence of the Asian markets this year is one of the more positive developments for global equities. Fortunately, there are numerous ETF options for taking part in this growth, and some of the best are the four funds featured: iShares Asia / Pacific Dividend 30 Index Fund (DVYA), SPDR S&P Emerging Asia Pacific ETF (GMF), SPDR S&P Small Cap Emerging Asia Pacific ETF (GMFS) and FTSE ASEAN 40 ETF (ASEA).

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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In case you missed it, I encourage you to read my article from last week about India’s potential for growth. I also invite you to share your thoughts below.

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I think that now is as good a time as any to make sure you fine-tune your focus for the second half of what has so far been a most unusual year.

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