The Association of Southeast Asian Nations, or ASEAN for
short, and their economies have had a long tradition of enticing
investors from all over the globe. This is because the market is
an attractive destination for domestic and foreign investors
thanks to solid growth rates, booming populations and generally
good governance when compared to other emerging regions of the
The region has recovered nicely from the shocks of 1998 and
many countries have developed significant capital stocks in order
to buffer themselves from future issues, a trend that could
reduce risk going forward.
Thanks to this and weak performances in some BRIC markets,
many countries have seen a substantial amount of inflow in the
recent past, sparking new developments in both the manufacturing
and natural resource industries (
Three Country ETFs Struggling in 2013
The high growth rates expected in these economies
also beats out their developed market counterparts by leaps
and bounds. The increase in per capita income and consumption in
the burgeoning middle class in these markets ensures that the
rates are sustainable.
These countries are also somewhat immune to Western shocks and
are an interesting option to invest in. However, there are
certain risks like liquidity risk, geopolitical problems, and
currency issues which can hurt the region (
Top Performing ETFs of the First Quarter
Still we believe that these markets are tremendous options for
many investors and definitely worth a closer look. Below we have
highlighted some of the Southeast Asia
that could make for interesting picks for an investor, given the
strong returns and bright outlooks both in the near and long
The Indonesian economy, the biggest in Southeast Asia, appears
to be poised for good growth in 2013. This is largely
attributable to healthy domestic consumption, a favorable
investment climate and increased infrastructure development.
Low inflation and interest rates should also support economic
growth, helping the country to surge higher in the years ahead.
This, along with strong domestic consumption, has enabled the
economy to maintain a mid-single digit GDP growth rate for the
past eight years, suggesting impressive resilience for the
Funds tracking the Indonesian economy have proved to be strong
performers in 2013 after a disappointing performance in 2012 (
Indonesia ETFs: Can the Run Continue?
Market Vectors Indonesia Small-Cap ETF (
Among the top performers in the ETF world, Indonesian ETFs put
up a remarkable show in the first quarter. The fund has now
recorded an impressive year-to-date gain of 29.4%, easily
crushing pretty much every other ETF in the market.
As the name suggests, the recently launched IDXJ offers a
targeted exposure to the small-cap segment of the Indonesian
market thereby providing a better opportunity to tap domestic
IDXJ manages an asset base of $10.4 million and provides
exposure to 27 small-cap securities of Indonesia. The fund
charges an expense ratio of 61 basis points annually.
The ETF appears to be concentrated in the top ten holdings to
which it allocates a hefty 58.04% of the asset base. Among sector
allocations, Financials dominates the list with a 42.1% share
while Industrials and Energy get the next two positions with
allocations of 24.8% and 11.7% of the asset base,
Other Indonesia ETFs
Among the ETFs providing exposure to the Indonesian economy,
performance of IDXJ has been the most striking in the new year.
However, the other two ETFs tracking the market,
The Market Vectors Indonesia ETF (
iShares MSCI Indonesia Investable Market Index Fund
, have also put up a remarkable show in 2013.
In the year-to-date period, EIDO has returned 16% to investors
while IDX recorded a return of 12.6% (
Can Indonesia ETFs Rebound in 2013?
Thailand seems to have recovered quite well and is expanding
rapidly after the strong flood that had hit the nation in 2011.
This is well evidenced by its fourth quarter GDP growth rate
which came in at a robust 18.9%, well above the consensus
Higher government spending and strong domestic demand helped
to mitigate the negative impact from lower exports. Additionally,
recovery in China and the U.S. will assist the nation to regain
its export business. The economy is expected to post growth of
4.5% to 5.5% in 2013.
In such a scenario, a look at the
iShares MSCI Thailand Investable Market Index ETF
) could be a good idea. Attributable to the strong fundamentals
of the economy, THD has been able to perform really well in 2013
and post significant returns in the year-to-date period (
Top Ranked Thailand ETF in Focus
THD which holds 92 stocks in its basket has recorded a gain of
14.1% year to date. However, the fund appears to be concentrated
from both a sector and an individual security perspective.
While 49.5% of the asset base comprises of the top ten
holdings, among sector allocation, Banks comprise roughly
one-third of the total assets while Energy companies make up
another fifth. Among other sectors, the fund doesn't invest more
than 9.8%. The fund charges a fee of 60 basis points on an annual
The Philippines has shown incredible resilience to the global
turmoil, posting a solid GDP growth rate. For the full year, the
region is expected to deliver a sharp growth rate of 6% as
compared to the earlier forecast of 5%.
Rating agencies have taken note as well, as in early 2012
S&P bumped the country's long-term foreign
currency-denominated debt to BB+ from BB, the highest rating
since 2003. This does not end here with Moody's lifting its
outlook on the economy to positive and Fitch recently upgrading
the region's rating to investment grade (
Philippines ETF Surges on Fitch Upgrade
Additionally, the Philippines is supported by strong domestic
demand, low level of inflation and low credit-to-GDP and
loan-to-deposit ratios. However, a high unemployment rate may
pose an obstacle to the economy's growth path.
Clearly, the trends are continuing to be positive for the
country, suggesting that some might want to consider the area for
investment. One way to do this in basket form is via the
MSCI Philippines Investable Market Index Fund (
The return offered by EPHE is an ample proof of the strong
fundamentals of the economy. The fund has returned a robust
20.84% in the year-to-date period.
The fund trades with an asset base of $221.4 million and
currently has just over 42 securities in its basket. Investors
should note that the fund is concentrated in the top 10 holdings
with more than 55% of investment.
Among sector allocation as well, the fund appears to have a
concentrated exposure. The maximum sector exposure is to
Financials (42.9%) and Industrials (25.48%).
Among others the fund does not invest more than 9.08%. The
fund charges a fee of 60 basis points on an annual basis (
Too late to Buy the Philippines ETF?
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ISHARS-EMG MKT (EEM): ETF Research Reports
ISHARS-MS INDON (EIDO): ETF Research Reports
ISHARS-MS PH IM (EPHE): ETF Research Reports
MKT VEC-INDONES (IDX): ETF Research Reports
MKT VEC-INDO SC (IDXJ): ETF Research Reports
ISHRS-MSCI THAI (THD): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
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