Why Asia's ETFs Need a Reboot | ETF Trends

The impact and wrath of the global recession has taken its toll on Asian economies and exchange traded funds (ETFs) that track the emerging market.

To make it even worse, the fear that consumers have of spending may prolong this recession.

China’s Jobless Rate. With the urban jobless rate in China ballooning to its highest rate in the last 2 1/2 years, savings rates are expected to grow exponentially taking a toll on consumer demand and  paving a muddy path for economic growth. Experts believe that unemployment rates throughout Asia will increase by another full percentage point and consumer spending as a share of GDP to fall to a seven year low, states Kevin Plumberg of Asia Asset Allocation.

Contraction in Singapore. Things in Singapore aren’t looking much better. The nation’s economy has contracted in all of the last three quarters, job losses are expected to more than triple in 2009 and overseas shipments are expected to decline by 9% to 11% over the next year. This is forcing the nation to turn to extreme measures and the government to extreme spending. The government has been contemplating massive cash handouts, tax and utility rebates, states Shamim Adam of Bloomberg.

Malaysia Cuts Rates. Lastly, Malaysia’s central bank has been forced to cut its benchmark interest rate to 2.5%, the lowest its been in over a decade, states Stephanie Phang of Bloomberg.

In an attempt to rescue the Eastern part of the world, Asian governments are planning massive spending programs and hopefully this attempt will get the wheels churning and give Asian consumers a more optimistic outlook on their economy.

Two ETFs to watch for signs that the efforts these countries are making are working are:

PowerShares Dynamic Asia Pacific (PUA), 15.8% is Singapore and 24% is China

SPDR S&P Emerging Asia Pacific Report (GMF), 25.7% is China and 6.0% is Malaysia.

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.