Asia ETFs: Will Revised Asian Growth Forecasts Translate into Investment Gains?

by: Gary Gordon

I have to hand it to the Economist, they spin a great yarn. They’ve noted that the Asia Development Bank (ADB) is more optimistic about Asia’s growth for 2010 today than how they felt in March of 2009.

Well, first of all, who isn’t a bit more optimistic about GDP growth forecasts today than they may have felt in the March abyss? Second, a closer inspection of the ADB data reveals a more subdued picture than the “headline number.”

The headline number that the Economist discussed is for 2010 GDP growth for Asia to hit 6.4%, up from a 6% projection in the early part of this year. However, of 10 major Asian economies, the forecasts were only raised for 3 of the largest economies: China, India and Indonesia.

Granted, these may be the most influential of Asia’s emergers. Yet the other 7 countries received the same growth forecast or… in Malaysia’s case… a slight revision downward.

In actuality, then, there’s a belief that the 3 huge powerhouses will grow at a slightly enhanced pace, while the Asian tigers (Taiwan, Singapore, South Korea and Hong Kong) will still grow at a rate anticipated back in March.

Obviously, economic forecasts alone may not move the investment needle. By the same token, investors who feel that most of the earlier projections have been “priced into” market gains may wish to stick with the few emerging economies with actual upgrades.

Year-Over-Year (10/1/08-9/30/09) % Results For 10 Asian Countries
1-Year %
Indonesia Fund (NYSEMKT:IF) 44.8%
WisdomTree India Earnings Fund (NYSEARCA:EPI) 34.6%
iShares MSCI Thailand Index (NYSEARCA:THD) 26.9%
iShares MSCI Taiwan Index Fund (NYSEARCA:EWT) 23.4%
iShares MSCI Malaysia Index Fund (NYSEARCA:EWM) 21.4%
PowerShares Golden Dragon China Fund (NASDAQ:PGJ) 21.3%
iShares MSCI South Korea (NYSEARCA:EWY) 20.8%
iShares MSCI Hong Kong (NYSEARCA:EWH) 9.8%
iShares MSCI Singapore Index Fund (NYSEARCA:EWS) 9.0%
Market Vectors Vietnam (NYSEARCA:VNM) N/A

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.