Growth expectations among Asian countries are on the rise. Investors can also tap into this segment of the global market though broad region-specific ETFs.
The International Monetary Fund recently released its latest global economic projections, upwardly revising its growth outlook on Japan and China, reports Sara Potter for FactSet.
In April 2016, the IMF’s World Economic Outlook for 2017 GDP growth showed a 0.1% contraction, but in its latest forecast, the IMF now projects a 1.5% expansion, which would match Japan’s best annual economic performance since 2013.
Supporting Japan’s improved outlook, domestic and global demand is on the rise. The Japanese economy is being supported by stimulus from both fiscal and monetary policies as represented by two pillars of the so-called Abenomics, or economic policy of Japan’s Prime Minister Shinzo Abe.
China is expected to produce higher-than-expected growth, with its economy expanding at an accelerated 6.8% in 2017 from 6.7% in 2016, compared to the IMF’s predicted 6.2% back in its April 2016 WEO outlook. Fueling the recent growth spurt, an expansionary government policy mix has helped the economy.
While India’s outlook has been downwardly revised, India’s economy is still expected to expand a robust 6.7% ahead. The IMF also remains confident that India’s ongoing structural reforms will have positive economic impacts in the medium term, with growth projected at 7.4% in 2018 and above 8% further out.
Meanwhile, the broad emerging and developing Asia countries are projected to grow by 6.5% in 2017 and 2018, mainly fueled by China and India. Among the ASEAN-5 economies – Indonesia, Malaysia, Philippines, Thailand, Vietnam, growth will pick up to 5.2% in both 2017 and 2018 from 4.9% 2016.
Investors interested in Asia Pacific exposure may consider a broad region-related ETF, such as the Vanguard FTSE Pacific ETF (NYSEArca: VPL), Global X FTSE ASEAN 40 ETF (NYSEArca: ASEA), SPDR S&P Emerging Asia Pacific ETF (NYSEArca: GMF) and iShares Core MSCI Pacific ETF (NYSEArca: IPAC).
VPL tries to reflect the performance of the FTSE Developed Asia Pacific All Cap Index, which covers developed Asia Pacific economies, including Japan 58.9%, Australia 16.1%, Korea 12.7%, Hong Kong 8.5%, Singapore 3.1% and New Zealand 0.7%.
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IPAC includes a similar developed Asia Pacific weight, tracking the MSCI Pacific Investable Market Index, with a 67.6% position in Japan, 18.1% in Australia, 8.9% in Hong Kong and 3.6% in Singapore. However, since MSCI considers South Korea an emerging market, IPAC does not include Korea exposure.
ASEA leans toward southeast Asian economies, including Singapore 30.1%, Malaysia 22.1%, Indonesia 19.2%, Thailand 22.2% and Philippines 6.5%.
GMF focuses on emerging Asia Pacific countries, including China 47.9%, Taiwan 20.4%, India 17.8%, Malaysia 3.5%, Thailand 4.1%, Indonesia 3.5% and Philippines 1.8%.
For more information on Asian markets, visit our Asia category.