Almost everyone remembers the famous line from the Rolling Stones, "You can't always get what you want." Ironically, this is often how I feel about a number of Asia ETFs.
Let me start by reminding readers that I lived in Taiwan in the mid-80s and Hong Kong in the early 90s. What's more, I've traveled throughout Southeast Asia many times over. Indeed, my affection for the region may contribute to an unusually positive bias.
That said, I frequently acknowledge a number of limitations with respect to ETFs dedicated to Asia. For instance, there are some folks who may wish to take advantage of a growing middle class in China. With Hong Kong serving as a major hub for the mainland, should you be quick to select iShares MSCI Hong Kong (EWH)?
Unfortunately, EWH has a 60% weighting in financial firms and a meager 10% allotted to consumer discretionary companies. While the fund often moves in the direction I might expect foreign stocks to move on a given day, it still is grossly overweight the financial arena.
It is possible to escape a disproportionately large financial segment by utilizing the PowerShares BLDRS Asia ADR Index (ADRA). It has a 24% weighting in consumer discretionary Asian ADRs on U.S. exchanges, and a smaller 23% weighting in financial stocks. However, PowerShares BLDRS Asia ADR Index (ADRA) is dominated by a 50% weighting in recession-slammed Japan.
Now what is an investor going to do? He/she could look to SPDR Emerging Asia Pacific (GMF), yet the volatility of the emerging stocks may be difficult to swallow. Conversely, one could explore the iShares MSCI All County Asia excl Japan (AAXJ). Even this, however, comes with a 1/3 weighting in financial stocks.
There's no easy solution. Sometimes, you may have to go with the ETF that doesn't give you what you want. Then again, like the Rolling Stones finished with, "...you get what you need."
Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.