With European woes and unemployment levels still remaining
high in the U.S., investors have turned their attention to those
economies which have reasonable growth.
In such an economic environment, Asia is one such continent
which an investor can favor when compared to the developed
economies. A rising consumer market and strong budget situation
provide cushion to these economies in this otherwise shaky
economic environment (
Southeast Asia ETF Investing 101
).
Basically investment in Asia revolves around three countries,
namely, India, China and Japan. Although India and China have
been growing slowly of late it is believed that these regions are
in the mid-cycle of the slowdown and a recovery could be underway
(
Does Your Portfolio Need An India ETF?
).
However, Japan is one region that an investor should give a
second thought before investing. Unlike its rapidly growing
counterparts, Japan is stuck in a low growth quagmire. The
country is now approaching its third decade of near zero growth
with little hope in sight for a turnaround.
Japan was trying to recover from 2011's earthquake and Tsunami
which devastated many parts of the country. But its recovery was
hindered by a couple of reasons. Income for the country is
largely tied to export. However, the euro zone crisis and weak
recovery in the U.S. jeopardized the export market and made a
recovery more difficult.
Given the grim realities of the Japanese market, investors can
skew their portfolio from the land of the rising sun to other
more promising Asian nations.
In this backdrop, investors seeking to invest in the broad
Asian economy without any exposure to Japan can do it through a
basket of stocks or
ETFs
. Here we would highlight the Zacks top ranked ETF providing
exposure to Asia excluding Japan.
WisdomTree Asia Pacific ex-Japan Fund (AXJL) is ranked Zacks
Rank 1 or Strong Buy and we expect it to outperform its peers in
a timeframe of one year meaning it could be an excellent pick for
investors seeking more exposure to this slice of the market while
also utilizing our new ranking system as well (
Asia Ex-Japan ETF Investing 101
).
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in
the context of our outlook for the underlying industry, sector,
style box, or asset class. Our proprietary methodology also takes
into account the risk preferences of investors. ETFs are ranked
on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also
receive one of three risk ratings, namely, Low, Medium, or
High.
The aim of our models is to select the best ETFs within each
risk category. We assign each ETF one of five ranks within each
risk bucket. Thus, the Zacks Rank reflects the expected return of
an ETF relative to other products with a similar level of
risk.
For investors seeking to apply this methodology to their
portfolio in Asia excluding Japan, we have taken a closer look at
the top ranked AXJL below:
WisdomTree Asia Pacific ex-Japan Fund (
AXJL
)
The fund tracks the WisdomTree Asia Pacific ex-Japan Index
which looks to focus on 300 large companies ranked by market
capitalization that are incorporated in various parts of
Asia. This not only excludes Japan from its product
portfolio but also serves investors with an impressive dividend
yield as well.
For a broad exposure to Asia along with a good dividend yield,
AXJL is a great option. The fund has been able to provide a
moderate level of diversification to investors as it holds 31% of
the asset base in the top 10 holdings, suggesting a pretty spread
out profile.
The ETF manages an asset base of $87.1 million and, despite a
broad exposure to Asia and a good level of dividends, it does not
seem to be very popular among investors as indicated by its
extremely low trading volume. The ETF charges an expense ratio of
48 basis points and it generates a SEC 30-day yield of 3.39% (
11 Great Dividend ETFs
).
In terms of sector exposure, financials are a top choice for
the fund with an asset allocation of 25.27%. Telecommunication
services, materials and energy also enjoy double-digit shares
with asset allocation at 21.9%, 11.2% and 10.3%,
respectively.
The country-wise breakdown comprises Australia taking the top
spot with 23.7% of investment while India is last on the radar
with just 2.3% of investment (
Australia ETF Investing 101
). Other growing economies like Hong Kong and Taiwan are the
second and third choices for the fund with double-digit
allocations as well in this top ranked ETF.
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WISDMTR-AP-JPN (AXJL): ETF Research Reports
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CHINA MOBLE-ADR (CHL): Free Stock Analysis
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