Southeast Asian ETFs Heat Up

May 9th at 11:00am by Tom Lydon

Southeast Asian economies and related exchange traded funds have been on fire over the past year. Healthy domestic consumption and capital spending have helped these economies grow at a decent pace over the past few years, but can it last?

 “The International Monetary Fund, World Bank and Asian Development Bank have all recently issued fairly consistent growth forecasts and outlooks for the Asian region. All three forecast mid-single-digit GDP growth for the ASEAN-4 (Indonesia, Malaysia, Thailand, and the Philippines) over the next two years, driven by strong domestic demand and infrastructure investment, growth in intraregional trade, and an improving external demand environment, which will be positive for the more export-oriented economies,” Patricia Oey wrote for Morningstar. [Thailand ETF Hits Roadblock on Infrastructure Spending]

The following ETFs have been stand-out performers in 2012, and have continued this performance into 2013. Take note, the iShares MSCI Emerging Markets Index (NYSEArca: EEM) is down 0.2% year-to-date. [Three International ETFs Riding a Growth Trend]

  • iShares MSCI Thailand Capped Investable Market (NYSEArca: THD) up 13.9% year-to-date
  • iShares MSCI Indonesia Investable Market Index (NYSEArca: EIDO) up 14.9% year-to-date
  • Market Vectors Indonesia (NYSEArca: IDX) up 12.5% year-to-date
  • iShares MSCI Philippines Investable Market (NYSEArca: EPHE) up 22% year-to-date

The possibility of financial problems from rapid credit growth and rising asset prices is not large enough to be an immediate concern, and the IMF has stated that housing prices, equity and credit markets in these countries have not reached overheated or bubble territory relative to 2010-2012 averages, reports Oey. [Indo ETFs Ride the Growth Wave]

Certain factors do remain a threat however, such as household debt in Thailand increasing around a 15% to 20% annualized rate. There has also been warnings about an over-valued housing market in Thailand, with similar property concerns surfacing in Indonesia and Philippines. The main concern is inflation, which could become a major threat if the global economic recovery should accelerate unexepectedly. [Why Indo ETFs are on a Tear]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.