Asia and its exchange traded funds (ETFs) have been going through a cooling trend, and economists now say that Hong Kong has cooled to its slowest pace since the third quarter of 2003.

That was just after the economy began to recover after shrinking during a respiratory syndrome epidemic,  reports Nipa Piboontanasawat for Bloomberg.

GDP rose 4.2% in the second quarter from a year earlier, and the curbed global demand for Chinese-made exports shipped through Hong Kong has affected their economy. The GDP in the previous three months had risen 7.3%. From the first quarter, Hong Kong’s economy contracted 1.4%.

Likewise, rising prices and a stock market decline has dampened the hot streak of iShares MSCI Hong Kong (EWH). Top holdings are given toward financial services at a whopping 55%, giving the outlook for a recovery a longer time frame. Utilities are weighted at 14.4% and telecom at 10.4% round out the ETF.

Also launched this year is the NETS Hang Seng Index Fund (HKG), which is down 11% since its April 11 inception. The fund has a lower weighting in financials, at 43.2%. Telecommunications is 16.3% and energy is 12.2%.

Investors today dumped Hong Kong banking stocks after JPMorgan Chase & Co. announced more losses from its mortgage-related investments, reports Thomson Financial.

The government is keeping its forecast for economic growth between 4% and 5% for this year. The expansion in 2007 was at 6.4%, while inflation was 2%. This year, it’s expected to jump to 4.2%.

Tags: Asia, Emerging Markets, EWH, Financial, HKG, Hong Kong