There is nothing wrong with using exchange traded funds (ETFs) to invest in a growing market.  China is a big, growing, country and the iShares FTSE/Xinhua China (FXI) is up 60% for the year and PowerShares Golden Dragon USX China (PGJ) is up 40%.  But sometimes it doesn’t hurt to look at the surrounding areas.

Direct investment in China is difficult and China’s stock exchanges don’t always meet the standards of transparency that investors from other nations like to see.  China’s neighbors have found ways to do business in the country and are doing quite well, according to Donald H.Gold of Investor’s Business Daily.

The top companies in iShares MSCI Singapore Index (EWS) do business with mainland China and none trade on a U.S. exchange.  The holdings include banks, oil rig builder and telecommunications.  The ETF is up 41% for the year.  Besides business with China, Singapore has a healthy economy.

Hong Kong is another neighbor who has done well by doing business in China.  iShares MSCI Hong Kong (EWH) is diverse, as top holdings include a telecom, conglomerate, real estate developer, power generator and bank.  EWH is up 24%.

The other close neighbor, Taiwan, is represented with the iShares MSCI Taiwan (EWT) ETF.  While this ETF is not as diverse as the others, 58% of the fund is devoted to technology, it is up 14% for the year.

For full disclosure, FXI is held in some of Tom Lydon’s client accounts.

Tags: Asia, China, FXI, PGJ, Singapore

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