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  • Why Wall Street Is Long On South East Asian ETFs 0 comments
    Mar 18, 2013 7:14 AM

    Financial advisors and bankers world-wide seem to be greatly impressed by the performance of the investments in the South East Asia trade bloc (Singapore, Malaysia, Vietnam, Cambodia, Laos, Thailand, Malaysia, Philippines, Burma, East Timor, Brunei and Indonesia).

    The growth potential may be estimated knowing that Wall Street major - Goldman Sachs has been openly endorsing among its clients to purchase Indonesia based shares.

    Similar is the case with McKinsey, in one of its reports last year it urged on the importance of this Asian Island along with Thailand and Vietnam which is notably also one of the fastest growing frontier countries.

    Morgan and Stanley too are clearly bullish on the Thailand market and index attuned Thailand ETFs and the Bank of America [BofA] is increasing its Malaysian ties.

    The analysts for these outcomes commonly agree on the following strongholds of ASEAN Investments:
    • Companies of the region are in the insipient stage and therefore present a further growth story and significant value addition to their stocks.
    • The Micro and Small Cap Securities too are less volatile as they have not yet seen their valuations peak out thus representing further robustness to the ASEAN Stock Exchanges and South East Asian ETFs due to better risk tolerance in the broader markets.

    FTSE listed ASEAN ETFs and funds have given as much as 20% returns to American Investors and most Singapore ETFs have visibly outperformed their respective composite benchmarks.

    The positive outlook brings with it an encouraging sentiment for foreign investors, as the growth in this region is going to stay and project healthy long term returns. These nations produce cheap labour yet educated. This works in favour of this area as the industrialists are willing to quit countries like China and move to this region and the resulting increase in job openings will create higher wages for the native workers. The sustainability factor in this realm can be achieved with a higher labour efficiency and productivity. Also another factor that will aid in increase in labour output is adopting newer technological methods, innovation and equipment coupled with less dependency on labour intensive ways.

    The governments too have increased their budgets on the development of infrastructure, new roads, bridges and airports. The private sector can enter partnerships with the public firms to cater to the energy, water and other needs. An estimated $ 8+ trillion is set aside for infrastructure building and other projects.

    The consumer spending in the region has gone up due to affluence and the growing aspiration to own all latest gadgets and goods. The companies selling different services and goods can fortunately expect investor interest (in them).

    The Banking sector of the entire area has retained its strength after the collapse of 1990's caused due to excessive loaning. The current figures display low debts and healthy balance sheets.

    Thailand boasts of a GDP $ 600+ billion. This country showed a tremendous recovery process after it being hit by floods in the year 2011. It has established a respectable export market in United States, with sending across telecommunication products and computer accessories. The Realty investments especially in Pattaya have been on the rise since 2008.

    Similarly Philippines too have shown an increase in real estate selling of both residential and commercial space. Its GDP exceeded its government's prediction of 6% for year 2012 and reached around 6.6% level of growth.

    By 2016, it has been forecasted that Philippines will have a booming BPO (Business processing outsourcing) industry worth $ 25 billion aiding in progress.

    Southeast Asian ETF give out a balance but diversified exposure to the ASEAN economies and being bench mark bound, an in place regulatory environ is a given.

    Global X ASEAN ETF [ASEA] delivers as per the performance of the 40 stocks that make up the FTSE ASEAN 40 Index and the issuers charge a net annual expense as per 65 basis points. The said benchmark comprises of the equity only from the five founding member countries i.e. Singapore [38.63], Indonesia [20.06], Malaysia [27.24], Thailand [13.36] and Philippines [0.72%]. As per the Global X Management ASEA fund uses this strategy for added safety as these nations are the biggest trading partners of the new regions of the area and stand to gain maximum from their economic growth. When invest in Southeast Asia, the fund offers top four assets in the form of ASTRA International [6.14%], DB Group Holdings [5.94%], Singapore Telecom [5.93%] and Overseas China Banking Corp. [5.66%] as on 3/15/2013.

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