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The Power Key Of Investment Opportunity- ASEAN ETF

Jul. 18, 2013 7:58 AM ET
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john71701's Blog
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The Association of Southeast Asian Nations or ASEAN comprises of these member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam including one developed market-Singapore. This geo-political and economic organization, ASEAN, works to cross-promote each member and boost their economic and social growth. This region has a bigger economy than India with a population of more than 600 million. The Two year old ETF is the only significant multi country ETF, keeping track of Asian Nations without the exposure of China. Singapore is the most developed and stable market. It is related as one of the financial centers of the world and receives the most foreign investments, much more than New York, Switzerland or as a matter of fact Frankfurt put together. The association has an aggregate stock-market capitalization of $1.8 billion. Some of the important factors that help promote its welfare are their low labor costs and strong relationships with China. Foreign investments are encouraged because of their liberization policies. More over this region is extremely rich in natural resources.

When formed in 1967 with an initial number of five members, their primary focus was to join forces to promote the regional free trade and economic co-ordination. Interestingly the FDI, Foreign direct Investment has been flowing into this region and has tripled since the last 3 years.

Global X FTSE ASEAN of (ASEA) is the first ETF of the original five members and comprises of 40 companies to its credit. The weight age of Singapore in this index is 41% and 33% of Malaysia. Indonesia and Thailand make up 25% of the share of this index with Philippines less than 1%. Keeping in mind that ASEA is a larger market than China it is potentially advisable to invest in it. It weighs mostly on the Financial Industry by 41%, Telecommunication Industry by 17.53%. The Industrial and Energy sector have a weight age of 22.66%.

The equity market structures of this region are very balanced and give a good exposure towards the growing domestic demands. The government ownership in this area is very low whereas the private investments with public support and emerging new markets are an attractive feature. The economy of this area sees a growing demographic scenario of the young middle class.

Though The BRIC countries -- Brazil, Russia, India and China draw a fair amount of attraction towards the investors, the South Asian ETF are still on the higher charts. The economies combined together of the ten members have seen a 6.5% average growth rate since the last decade and their GDP is nearing $2 trillion.

Malaysia has a well developed economy and is very rich in its abundance of natural resources for example petroleum, copper, iron ore and Natural gas. Some of the major companies in China are shifting their manufacturing units to Singapore which is currently rated in the world economy as AAA in terms of Credit rating. This shift is largely due to the favorable factors such as its infrastructure and intellectual property protecting laws. The logistics of this country also serve as a favorable factor.

Invest in Southeast Asia gives you the benefit of instant diversification on U.S. traded securities. According to Rockefeller Foundation, South Asian Market is a region ready to be tapped. There is a need for capital in this area. In fact Indonesia is trying to improve its budget deficit so as to create a more investment friendly environment. Lately they have been keeping off track due to heavy government expenditure in the fuel sector.

According to Boston Consulting Group, Indonesia sees an explosion of the young population of the middle class, which is expected to double by 2020. The Association of Southeast Asian Nations has already begun to negotiate on a free trade agreement with Australia, China, Japan , New Zealand and as a matter of fact India as well. This negotiation is expected to bring a powerful impact of a surprisingly $17 trillion of trade by 2015.

Global X FTSE 40 ASEAN ETF [ASEA] delivers as per the performance of the name sake benchmark and charges a net expense of 0.65% per unit. Singapore, Malaysia and Indonesia account for the 80% concentration of the asset. SINGAPORE TELECOMM, DBS GROUP HOLDINGS LTD., OVERSEA-CHINESE BANKING C and UNITED OVERSEAS BANK are the top four Holdings as on 7/16/2013 for Southeast Asian ETF.

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