Let Asian Growth Propel Your Portfolio Higher
by Tony Daltorio, Investment U Research
Tuesday, January 5, 2009
I’ve got good news and bad news…
- The good news: Consumer confidence is rising sharply.
- The bad news: Those consumers live in Asia.
According to the Nielsen research group, developing countries are seeing renewed interest in purchasing products.
Meanwhile, the Western world isn’t looking nearly as enthusiastic, and consumer confidence levels in particularly the United States have dropped below the global average.
While Asian nations such as the Philippines, Indonesia and India have perked up significantly, China in particular has benefited from a rebound in consumer consumption. Purchases of groceries, clothing and home entertainment have all headed higher amid optimism over the job market and as the number of middle class citizens rises.
The latter point is noted by Chris Morley, managing director of Nielsen China. With more Chinese citizens crossing the line from poverty into more comfortable living, they have money to buy bigger-ticket items for the first time. And that increased spending activity has factored heavily into China’s current impressive growth.
And although the country has experienced manufacturing declines in its largest cities, taking its toll on consumer confidence in those areas, Morley reports that, “hundreds of millions of consumers are seemingly unaffected by the downturn, highlighting the depth of China’s economic growth.”
This increased consumer spending and economic growth benefits more than just China. It’s filtering down to its Asian neighbors, too…
When China Spends, Asia Benefits
Countries like Japan, Hong Kong, Taiwan and Thailand exited their recessions in the second quarter of 2009. And Singapore’s economy expanded at its fastest rate in almost six years.
Not far behind, South Korea’s economy grew 2.9% during the third quarter of 2009, its fastest rate in seven years, thanks in large part to increasing Chinese demand.
Already Asia’s fifth largest economy, South Korea should see further growth, due to rising consumer demand from China. That kind of growth led to strong earnings at large Korean companies such as Hyundai and Samsung.
Asia’s continuing recovery underlines the trend of how both demand and production from Asian countries has assumed an increasing role in global growth over the past few months.
For example, China, South Korea and Japan alone account for 16% of the world’s GDP – a figure that keeps growing.
So forget Wall Street’s blathering about how Asia is dependent on demand from the Western world. The region is growing nicely on the back of inter-Asian trade alone, and is actively leading the world out of the economic downturn.
Four Ways to Invest In Asian Growth
One of the best ways to play this Asian growth is through exchange-traded funds (ETFs). They save time, effort, and money, while offering excellent diversification and minimizing risk. And there are usually several to choose from.
- For example, you can gain broad exposure to the Asian region with the iShares S&P Asia 50 Index ETF (NYSE: AIA) – a large-cap Asian ETF devoted to South Korea, Hong Kong, Taiwan, China and Singapore.
- If you’re looking for more individual options, such as China, you can go for the iShares FTSE/Xinhua China 25 Index (NYSE: FXI), which invests in China’s 25 most popular and liquid stocks.
- Alternatively, you can take advantage of an index created by renowned investor and Princeton University economist, Burton Malkiel. He’s an expert on China and his Claymore/AlphaShares China All-Cap Index (NYSE: YAO) fund offers a broad range of stocks of all market capitalizations and exposure to a variety of sectors.
- And in South Korea, you can gain quick, easy access to the country’s large-cap companies (mainly in the technology and industrial sectors) with iShares MSCI South Korea (NYSE: EWY).
All four of these funds aim to capitalize on what is the bottom line here: Asia is going places.
Good investing,
Tony Daltorio
Any investment contains risk. Please see our disclaimer.
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A very good service
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