When it comes to investing in Asia, investors often focus on China and Japan, the world's second- and third-largest economies, respectively. Fortunately, there are plenty of ETFs that can help investors access Asia without a heavy focus on China.
That is a positive at a time when China stocks are lagging while other emerging markets are rebounding. For example, the iShares China Large-Cap ETF (NYSEArca: FXI ) is trailing the MSCI Emerging Markets index in a big way this year. Due to the recent economic weakness, investors have been selling Chinese equities, which are among the emerging world's worst performers in 2016. The iShares MSCI Hong Kong ETF (NYSEArca: EWH ) , which recently started perking up, has also been ditched by investors.
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Given the risks that China faces, emerging market ETF investors can look to the EGShares EM Core ex-China ETF (NYSEArca: XCEM) as a way to tap into developing country growth without the being exposed to Chinese equities. XCEM is up 14.9% year-to-date.
XCEM tries to reflect the performance of the EGAI Emerging Markets ex-China Index, which tracks up to 700 emerging market companies, excluding those domiciled in China and Hong Kong. Top country weights include South Korea 18.7%, Taiwan 13.9%, India 13.1%, Brazil 13.1% and South Africa 10.4%.
Single-country options in Asia include developed markets such as Australia and lower beta emerging markets such as Taiwan.
Rebounding commodities prices and an accomodative central bank are combining to make the iShares MSCI Australia ETF (NYSEArca: EWA ) one of the more solid performers this year among single-country exchange traded funds tracking developed markets.
"Unlike other developed Asian nations like Japan, it's not running negative interest rates, so it's got plenty of room to loosen its monetary policy if its economy needs some help. Also, its stock market valuations are some of the best in the world," said Konstantin Etus, co-manager of the AdvisorOne CLS International Equity fund, in an interview with Lewis Braham of Barron's.
TheiShares MSCI Taiwan ETF (NYSEArca: EWT ) and the First Trust Taiwan AlphaDEX (NYSEArca: FTW ) are two options for investors looking to access Taiwan's tech-driven economy. On average, those ETF's allocate half their weights to tech stocks.
However, investing in Taiwan does not take China out of the equation.
"Taiwan exports 27.6% of GDP to China. But it has been shifting more to a service-oriented economy to accommodate China's increasingly consumption-oriented focus. China's consumption culture also drives one of Taiwan's biggest industries-semiconductor production," according to Barron's.
For more information on Emerging Markets ETFs, visit ourGlobal ETFs category.
iShares MSCI Australia ETF
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This article was provided by our partner Tom Lydon of etftrends.com.