Asia’s Younger Economies

Indonesia, the fourth most populous country in the world, is likened to China in its earlier stages. This year has been kind to the nation. Moody’s has raised the country’s sovereign debt rating to positive from stable, pointing to Indonesia’s “capacity for sustained strong growth and the overall stability and effectiveness of its fiscal and monetary policies”.

Vietnam has a large young demographic, is rich in resources, rapidly industrializing and has a government that is promoting business. The country’s economy has averaged a 7.3% GDP growth per year for the last 20 years. Labor disputes in China have also helped Vietnam’s appeal as an “off-shoring” locale from China due to its lower wage costs.

Malaysia is on an economic expansion plan after a new budget was revealed. Presenting the budget, the prime minister outlined the challenges the country is facing in terms of attracting foreign direct investment. So the 2011 agenda has a lot to do with expanding the economy, to boost appeal to investors.

The outlook for Thailand’s economy is looking much improved in the wake of unrest in the country in May, which hurt tourism and foreign investment. Thailand may look like a promising Southeast Asia market, but unrest and political risk continues to threaten to destabilize the economy. The country is heavily reliant on its exporting industries.

These aren’t all of the Asian countries, of course – there are plenty of others that are also available for investing via ETFs, including Singapore and Hong Kong.

Getting Exposure to Asia With ETFs

How much is too much, though? While the Asian economy has made huge strides in the last decade alone, the World Bank recently issued a caution on East Asian countries. While the report raised its economic outlook for the countries, it also warned of possible asset bubbles and slower growth as a result of foreign investment.

For that reason, we suggest watching Asia’s ETFs closely if you own them for your clients. Be prepared with a sell plan if this region exhibits any signs of trouble. You can easily do this in two ways: one, by incorporating Asia ETFs into your watchlist on the ETF Dashboard and two, by setting up alerts to be notified by email of any trading opportunities.

The ETF options for investing in Asia are plentiful, ranging from broad-based emerging Asia Pacific or Asia ex-Japan funds that hold emerging Asian countries. There is also a growing number of single-country Asia ETFs. Keep in mind, though, that the more narrow your exposure becomes, the more sensitive an ETF might be to shifts in the region.