While the emerging markets have stumbled in recent months, investors should still consider opportunities in Asian markets and related exchange traded funds.
Malaysia, the Philippines, Indonesia and China are among the most attractive developing economies based on a range of metrics like forecasts for gross domestic product and current account, sovereign ratings as well as stock and bond valuations, Bloomberg reports.
Malaysia appears strong due to its higher economic expansion than peers, a healthy current-account surplus and a dip in its real effective exchange rate. Moreover, newly-elected Prime Minister Mahathir Mohamad is implementing new reforms that could further support the economy, including plans to scrap a goods-and-services tax.
The Philippines and Indonesia enjoy positive outlooks on robust GDP growth, and a drop in their exchange rate valuation have offset risks from the emerging countries’ external deficits. The economy also found support from the monetary authorities after the Philippine central bank raised policy rates in May for the first time since 2014. Meanwhile, the Indonesia central bank hiked twice, including at a meeting on Wednesday, to stabilize the local currency.
“Asia will probably remain resilient against the rest of emerging markets from here as their economies and external balances are both relatively solid,” Koji Fukaya, chief executive officer of FPG Securities Co., told Bloomberg. “In a risk-on market, people don’t pay too much attention to the fundamentals, but when that starts to fade, people become more selective and Asia is providing relief for some.”
To gain exposure to these various markets, ETF investors can look to country-specific ETFs, such as the iShares MSCI Malaysia ETF (NYSEArca: EWM), iShares MSCI Philippines ETF (NYSEArca: EPHE), iShares MSCI Indonesia ETF (NYSEArca: EIDO) and VanEck Vectors Indonesia Index ETF (NYSEArca: IDX).
Investors can also take on broad exposure to these emerging Asian economies through region-themed ETFs. For instance, the SPDR S&P Emerging Asia Pacific ETF (NYSEArca: GMF) provides broad exposure to emerging economies in the Asian Pacific, including China 48.5%, Taiwan 20.1%, India 17.6%, Thailand 4.2%, Malaysia 3.5%, Indonesia 3.2% and Philippines 1.6%. The iShares MSCI All Country Asia ex Japan ETF (NYSEArca: AAXJ), which excludes Japanese and Australian stock exposure and tilts toward more emerging economies, including China 37.1%, Korea 16.8%, Taiwan 12.9%, Hong Kong 11.0%, India 9.3%, Singapore 4.0%, Malaysia 2.6%, Thailand 2.6%, Indonesia 2.2% and Philippines 1.1%.
For more information on Asian markets, visit our Asia category.