Value In Asia: Hong Kong And Singapore

Includes: EWHS, EWSS
by: Mary Daniel

Asia holds one of the greatest growth opportunities in terms of emerging markets. The area is ripe with resources and is one of the few places in the world where underdeveloped countries neighbor developed countries. The time to invest in this region just keeps getting better. China is continually facing pressure from the U.S. Along with other trading partners and developed nations as it pertains to its currency. The Chinese currency has long been a gripe of most investors. It is not pegged to anything and floats rather freely on the moods of China's fiscal policy makers. Instead of giving in and pegging its yuan to a more suitable fixed currency, China is looking to partner with other countries to lessen the currency divide. The two places that China is looking to for help in the globalization its currency are Hong Kong and Singapore.

China has, in recent years, been using Hong Kong to sell dim sum bonds. Dim sum bonds are denominated in Chinese yuan and issued in Hong Kong. The bonds have been attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in Chinese debt. So far the dim sum bonds have proved largely successful. But Hong Kong has much more going for it that just being a purveyor of Chinese currency. The iShares MSCI Hong Kong Small Index Fund EWHS takes advantage of the other factors that make Hong Kong a great investment value. Nearly half of the fund's holdings come from the consumer discretionary sector. It also includes a large portion of holdings from the financial, information technology, and industrials sector. Hong Kong has a lot to offer and is on its way to becoming a financial powerhouse in Asia.

Singapore, however, has already positioned itself as a financial hub in the region. China has attempted to breach Singapore with the same type of dim sum bonds that have been so popular in Hong Kong. However, Singapore's financial market is much more mature and therefore more difficult to enter. Singapore is already well-known on a global scale for both the cleanliness of its cities and its financial superiority alike. This is one of the bright spots in Asia. However, it can be very difficult for the individual investor to find investment opportunities in the country. The iShares MSCI Singapore Small Cap Index Fund EWSS seeks to solve this problem. Naturally, over half of this fund's holdings are in the financials sector. Other popular sectors are industrials and information technology. This ETF is a clear-cut way to gain investment exposure to Singapore.

Both Hong Kong and Singapore have great potential and a great future ahead of them as they contend for China's love. Hong Kong is looking to become a financial hub in the region as Singapore strives to maintain its standing. However, growth has been slow in the region lately due to China's manufacturing weakening and the global economic crisis. Only time will tell which one will best the other. However, both of these countries offer great investment value in Asia.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.