Fabian's Asian ETFs
12/02/2005 12:00 am EST
"I am currently advising investors to take a larger position in international investments, particularly those in the Asia-Pacific region," says fund guru, Doug Fabian. Here, the fund guru looks at ETFs focused on Japan and Korea, as indirect plays on the future of China.
"On the international front, Japan appears to be emerging from its 14-year malaise, and South Korea is on fire as its established economy is growing at a rate of about 6%. The international market is rife with opportunities and I encourage you to consider allocating as much as 30%-50% of your entire portfolio to select international ETFs. The world is changing and you have to consistently rethink your strategy. And getting in at the beginning of those trends is where most of the money is made.
"The US is just not growing at the rate of many emerging nations, particularly in Asia. China foresees continued growth in the area of 9%, while the US anticipates growth in the neighborhood of 3%. It's not un-American to buy international funds. In fact, it's very American to follow the pursuit of making and keeping a buck. In fact, it's the American Way. It's the classic ‘follow the money’ scenario and the money is pouring into the Asia Pacific region.
"Most investors are over 90% invested in domestic markets only. That's just not going to cut it. The US economy is fraught with challenges and it's time you explored ways to safely invest beyond our borders. And there's no better way than with the unbelievable selection of ETFs traded on our very own Wall Street, making it easy for your to safely garner big yields in the international arena.
"We’ve written extensively about China many times over the past year, and for good reason. Many ETFs intimately connected with China and benefiting from her massive economic influence are now providing investors with stellar returns. The first of our ‘China basket’ funds is the iShares MSCI Japan Index (EWJ ASE). This fund is designed to mirror the performance of the MSCI Japan Index, which is basically a collection of the biggest and best companies based in that country.
"It’s no surprise that EWJ has performed so well over the past three months, what with economic growth in the land of the rising sun picking up, and the recent landslide reelection of Prime Minister Junichiro Koizumi. The political victory of Koizumi and his party has many analysts convinced that Japan is mustering the political will to make some much-needed structural changes to its economy. Add the China effect to the country’s internals and you get what could be a very big run in EWJ.
"Then, there is the iShares MSCI South Korea Index (EWY ASE). Perhaps no country has benefited more from the China boom than South Korea, as the Dragon’s appetite has become vital to the South Korean export market. South Korea is now the third-largest economy in Asia after Japan and China, with its sovereign credit rating recently upgraded due to reduced tensions with totalitarian neighbor North Korea.
"The country just posted a better than expected third quarter, with gross domestic product growth of 4.4% year-on-year created largely by higher-than-anticipated exports and consumer spending. Of course, there’s the technical picture of EWY, and one look at its performance over the past three months quantifies all of the positive fundamental developments the country has undergone."