ETF Talk: Asia Offers Intriguing Investment 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.

With the U.S. government’s fiscal cliff still grabbing headlines and causing uncertainty that hurts domestic stocks, it may be time to shift our gaze to foreign markets. Asia is a region of the world that is showing stronger growth generally than anywhere else; it also can grow without much drag from the fiscal cliff in the United States. In addition, Asia does not have the sovereign debt problems and recessionary conditions currently afflicting Europe. An exchange-traded fund (ETF) that focuses on Asian markets is iShares S&P Asia 50 Index Fund (AIA).

This fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Asia 50. That index is designed to measure the performance of the 50 leading companies listed in four Asian countries or regions: Hong Kong, Singapore, South Korea and Taiwan.

AIA is up 19.22% year-to-date. Asia is drawing attention from investors due to its recent growth, as well as its potential for future growth, so this ETF’s rise should continue. Unlike the West, with the U.S. fiscal cliff and Europe’s aforementioned problems, Asia currently has nothing big looming and threatening to impede its continued growth.

As a comprehensive fund seeking to emulate Asia’s diversity, AIA has investments in many sectors. The two biggest, financial services (28.95%) and technology (25.73%), are followed by smaller weightings in communication services (10.37%), consumer cyclical (9.01%), energy (8.06%) and industrials (5.67%), among others with smaller percentages.

While no singular sector contains a majority of AIA’s assets, the fund is heavily invested in its top 10 holdings, which make up 50.25% of its total investments. Far and away the biggest investment is in Samsung Electronics Co. Ltd., which holds 14.16% of the fund’s assets. The next four holdings, in order, are: China Construction Bank Corp H Shares (5.65%), Taiwan Semicon Man TWD10 (5.61%), China Mobile Ltd. (5.34%) and Industrial and Commercial Bank of China Ltd. (4.99%).

Recent trends demonstrate that Asia is likely to continue its ascent. With the United States and Europe dealing with their respective issues, consider investing in Asia and Asian funds, such as AIA.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please check out my Successful Investing newsletter. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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