Investors should take a look at Asia-Pacific economies and related exchange traded funds as the countries experience rising domestic consumption on a growing labor, low interest rates and cheaper fuel prices.
According to the International Monetary Fund, the Asia-Pacific region’s gross domestic product is expected to expand 5.6% in 2015, reports Ansuya Harjani for CNBC.
The IMF also expects the global recovery will support demand for Asian exports.
“These factors are expected to offset the effect of tighter financial conditions from capital flow reversals triggered in part by the prospect of monetary tightening by the Federal Reserve,” the IMF said.
ETF investors seeking to capture the continued growth in the region have a number of broad Asia-Pacific options to choose from. For instance, the Vanguard FTSE Pacific ETF (NYSEArca: VPL) tracks some of the major players in the region, including Japan 58.3%, Australia 18.0%, Korea 10.4%, Hong Kong 9.2%, Singapore 3.6% and New Zealand 0.5%.
The iShares MSCI All Country Asia ex Japan ETF (NYSEArca: AAXJ) excludes Japanese and Australian stock exposure and tilts toward more emerging economies, including China 34.2%, Korea 17.6%, Taiwan 15.1%, India 7.9%, Hong Kong 7.7%, Singapore 5.5%, Malaysia 4.1%, Indonesia 2.9%, Thailand 2.6% and Philippines 1.6%.
Additionally, the SPDR S&P Emerging Asia Pacific ETF (NYSEArca: GMF) provides broad exposure to emerging economies in the Asian Pacific, including China 44.9%, Taiwan 23.2%, India 15.0%, Malaysia 5.5%, Indonesia 4.0%, Thailand 3.0%, Philippines 2.9% and Hong Kong 0.7%. [ETF Plays to Capture Growth in Emerging Asia]
However, the IMF did single out some Asia-Pacific economies. For instance, the Fund believes China’s economy could slow to 6.8% in 2015 and to 6.3% in 2016. Japan’s economy could pick up to 1.0% this year and to 1.2% next year.
Additionally, the IMF warned of the weakness in commodity exporters.
“Exporters of non-oil commodities whose prices have fallen sharply (Australia, Indonesia, Malaysia, and New Zealand) will be adversely affected by the terms-of-trade swing; elsewhere, however, growth is expected to stabilize or increase,” the Fund said.
Meanwhile, commodity importers, like India, will benefit from the lower prices. The Fund anticipates the India economy to expand 7.5% this year. Investors can track India through country-specific ETFs, including the WisdomTree India Earnings Fund (NYSEArca: EPI), iShares India 50 ETF (NasdaqGM: INDY) and PowerShares India Portfolio (NYSEArca: PIN). [Growing Workforce to Support India ETFs in the Long Haul]
For more information on the Asian markets, visit our Asia category.
Max Chen contributed to this article.