ETF Talk: The Pacific Rim Offers Opportunity beyond Japan

Doug Fabian

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

Sixty percent of the world’s population lives in Asia, but less than two percent of human beings live in Japan. With those population numbers in mind, you may want to focus your investments on some non-Japanese equities in the Pacific Rim that are tied to other developed economies in the region. One way to do so is through the iShares MSCI Pacific ex-Japan Fund (EPP).

This fund seeks results which, before fees and expenses, replicate the performance of an index of stocks from four countries: Australia, Hong Kong, New Zealand and Singapore.

EPP has notched a gain of 4% so far this year, following last year’s 22% jump. The yield of 4.74% offers another reason to own the fund. As the global market situation improves, so should the markets in the Pacific Rim, which this ETF is poised to tap.

EPP-090413

The fund’s holdings in Australia, Hong Kong, New Zealand and Singapore allow investors to diversify their exposure in Asia, while avoiding Japan’s traditionally anemic growth. The top sectors in this fund are financial services, 39%; real estate, 14%; and basic materials, 11%. Other holdings in the fund are industrials, consumer cyclical, consumer defensive, utilities, energy, communication services, healthcare and technology.

EPP’s top 10 individually held companies comprise 40.56% of its assets. The five biggest individual company holdings are Commonwealth Bank of Australia, 7.02%; BHP Billiton Ltd, 6.36%; Westpac Banking Corporation, 5.65%; Australia and New Zealand Banking Group Limited, 4.86%; and National Australia Bank Ltd., 4.50%.

While Asian investment stories tend to focus on Japan or developing economies like China, there’s huge potential upside to the Pacific Rim’s other developed economies, where business cultures that respect the rule of law and global business practices make it profitable to cater to Western-style consumer demands.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of 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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