While most Asian economies are considered to be in their developmental stages, a select group of Asian countries stand out. The exchange traded funds that track the Asian Tigers have evinced remarkable growth and they are now reflecting the stabilizing transition to developed markets.
The Asian Tigers include Hong Kong, Singapore, South Korea and Taiwan. They are highly developed economies that maintained exceptional growth rates during their rapid industrialization in the later half of the 20th century. As a result of their robust growth, these countries are considered borderline developed economies.
Countries on the precipice of moving to a developed state are characterized by strong manufacturing economies backed with a large, young population. These countries show improving standards of living and the population’s rising disposable income has boosted demand for consumer goods. Additionally, the Asian Tiger governments have been progressing alongside their economies, implementing progressive monetary and fiscal policies.
Hong Kong
The city of Hong Kong is a Special Administrative Region of the People’s Republic of China. Hong Kong maintains its own currency, which is pegged to the U.S. dollar, and runs its own political, legal and financial systems. The economy is also heavily tied to the global macroeconomic health and the Hong Kong market can quickly change on global sentiments.
The Hong Kong fund, which tracks the MSCI Hong Kong Index – not to be confused with the Hang Seng Index, has a heavy weighting toward financials, as real estate is big business in the area. Investors are worried about the property bubble forming in China, but the government has taken steps to curb the growing housing prices. While the fund is exposed to macroeconomic moves in Hong Kong, a majority of Hong Kong companies are largely tied to growth in China and many have operations in China, as well.
Additionally, the small-cap Hong Kong fund also holds a significant weighting in financials but its largest holding is in consumer discretionary. While the small-cap fund provides great exposure to the rising standard of living in the region, the ETF has historically been volatile.
Singapore
- iShares MSCI Singapore Index Fund (NYSEArca: EWS)
Singapore is a high-income economy that is ranked among the most competitive economies in the world. The country’s strong manufacturing and services sectors have helped bolster Singapore’s global competitiveness. While the country has proven to be a strong economic force, the global economy has been taking a step back and the Singapore Central Bank has projected a downward revised economic growth of 5.3% for the year.
Singapore has a strong government, sound commercial laws, strategic location and a growing population. While the country has a strong basis for growth, it is heavily reliant on trade from its neighbors as it is not rich in natural resources. The country is also home to one of the largest shipping ports in the world.