Vibrant Asian ETFs: A Region Not To Be Ignored

Includes: EWH, EWY, FXI, GXC, IDX
by: Bruce Vanderveen

The rapid growth of Macau, flourishing playground for Asia's newly rich, is illustrative of the region's growing wealth. The 11 square mile enclave near Hong Kong now boasts more gaming revenue that the entire U.S. Investors leave money on the table if they ignore Asia.

2013 now looks to be a banner year for Asia. The International Monetary Fund shows 2013 U.S. economic growth slowing to 2% while in China it picks up to over 8%. The reason for the discrepancy? In the U.S., Europe and Japan high levels of debt and social spending stifle growth as capital gets allocated to (mostly) non-productive uses.

More Positive Indicators for Asia

Zacks sees the Asia Pacific region as the strongest globally in 2013. The Economist lists 2013's ten fastest growing economies (Mongolia, Macau, Libya, China, and Bhutan are the top 5.) -- all 10 are in Asia or Africa.

Why ETFs Are Best - Especially Overseas

ETFs are broadly advantageous as they eliminate corporate risk when picking individual companies. This is especially true for investors who invest overseas where transparency may be poor and you can't easily visit facilities or do due diligence. Unlike individual stocks, ETFs are transparent, diversified, cost efficient, and liquid.

Here are some top Asian ETFs to consider:

iShares FTSE China 25 Index Fund (FXI) holds 25 large-cap, mostly state owned, Chinese companies. If forecasts for over 8% plus growth in China are correct these companies will do well.

FXI sectors include: Financial Services (57%), Communication Services (18%), Energy (15%), and Basic Materials (10%).

For a more broad based exposure to China look at SPDR S&P China (NYSEARCA:GXC) which has some 200 holdings of all cap sizes. Major sectors are: Financial Services (30%), Energy (12%), Technology (11%), Industrials (11%), Communication Services (9%) and Basic Materials (8%).

iShares MSCI South Korea Index Fund (EWY)

EWY's largest holding is Samsung Electronics (23%). Samsung is the world's premier electronics company. Consumers worldwide snap up Samsung's smart phones, TVs, cameras, and other electronic paraphernalia. Samsung, in my opinion, ranks as one of the world's best investments. The easiest way for U.S. investors to own it is through EWY.

EWY's major holdings include Technology (36%), Consumer Cyclical (15%), Industrials (14%), and Financial Services (13%).

iShares MSCI Hong Kong Index (EWH)

Just off China's coast are the special administrative regions of Hong Kong and the old Portuguese colony of Macau. Hong Kong is for business and, as noted earlier, Macau is for pleasure.

EWH is weighed heavily toward Real Estate (33% -- primarily in Hong Kong). Other holdings are Financial Services (26%), Utilities (12%) and Industrials (11%).

Market Vectors Indonesia Index ETF (IDX)

Zacks ranks this Indonesian ETF as 2013's most promising. With over 240 million people, Indonesia supplies an abundance of natural resources and consumer demand to the region

Major sectors are Financial Services (25%), Basic Materials (21%), and Consumer Defensive (16%).

After stagnating in 2012, IDX recently broke above its 200 day moving average -- a bullish sign.

Some More Asian ETFs

Other Asian ETFs include: Taiwan (NYSE:ETW), Malaysia (NYSEARCA:EWM), Singapore (NYSEARCA:EWS), Thailand (NYSEARCA:THD), Vietnam VNM), and The Philippines (NYSEARCA:EPHE).

Since Thailand and the Philippines were the stars of 2012 they may lag in 2013.

Summary: Look to Asia For Future Growth and Profits

The U.S., Europe, and Japan all have a heavy burden of entitlement obligations, stagnant economies, and poor demographics -- big obstacles to growth.

Asia's future, however, looks bright. Investors would do well to allocate a portion of their investments to the area. By using ETFs you participate with a degree of safety not found in individual stocks.

With the right Asian investments you too may be able to afford a trip to Macau.

Note: ETF sector data was sourced from Yahoo Finance

Disclaimer: This article is written for informational purposes only and isn't intended as investment advice. Do your own due diligence.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EWH, EWY, IDX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.