When it comes to technology, Silicon Valley remains the first place investors turn to find what the latest and hottest innovation is. After all, the U.S. is home to such tech leaders as Apple Inc. (AAPL) and Google Inc. (GOOG). However, Silicon Valley is only half the tech story.

There are actually more technology firms located in Asia than there are in the U.S. And perhaps more importantly, many of them are trading for metrics far cheaper than America’s tech giants and new social media/internet firms. For investors seriously looking at the tech sector, ignoring Asia is huge mistake.

A Huge, Innovative Market

The year 2009 saw the first time a non-American or European firm was awarded the most patent applications. It was Chinese consumer tech firm Huawei Technologies Co. Ltd. that brought home the gold. What’s more, firms located in the U.S. didn't even crack the top-10 in terms of awarded patents that year. That shift highlights how Asia has changed from being a low-cost manufacturer of electronic components to an innovator. That revolution is across all walks of tech, from clean energy and consumer products, to wireless technology and the mobile internet.

And driving that innovation is Asia’s vast tech-oriented workforce. According to a study by think-tank McKinsey & Co. Inc., India now supplies more technology workers than any other country, while China has surpassed the U.S. in terms of the number of R&D workers. China is now home to more than 1,000 R&D facilities. That’s about five times more than a decade ago.

Yet, Asian tech stocks are cheap. And in many cases cheaper than their American or European rivals.

The MSCI All-Country Asia Information Tech index is trading at a P/E of around 14. That compares to a P/E of 18 for the Technology Select Sector SPDR ETF (XLK), which tracks tech firms in the S&P 500. That P/E for Asian tech is cheaper than historical norms and is actually cheaper than Asian equities as a whole. (For related reading, see: Inside The Surging China Technology Stocks.)

Allocating To Asian Tech

With proven innovation and cheap prices, investors may want to consider adding Asia’s bright tech sector to their portfolios. A prime way to do that is through the iShares MSCI AC Asia Information Tech ETF (AAIT).

AAIT tracks the MSCI All-Country Asia Information Tech index and currently holds 95 different tech firms. This includes stocks like Samsung Electronics Co., Ltd. (SSNLF) and Infosys (INFY). Overall, Japan, South Korea and Taiwan make up about 80% of the ETF. AAIT is up around 13% this year alone. The only drawback to the fund is its low asset base of $7 million and low trading volume. Both could be signs of ETF closures.

To that end, investors may want to bet directly on these three nations via the iShares MSCI Taiwan (EWT), iShares MSCI South Korea Capped (EWY) and WisdomTree Japan Hedged Tech, Media & Telecom Fund (DXJT). Both EWT and EWY feature double-digit exposure to tech firms, while the DXJT focuses on the sector in tech-heavy Japan and provides a yen hedge.

Perhaps no nation has embraced technology like China. From clean energy firms like Trina Solar Ltd. (TSL) to internet companies like SINA Corp. (SINA), China is a well-established tech hotbed. And given China’s dominance in tech, investors may want specifically bet on the nation. The broad Guggenheim China Technology ETF (CQQQ) allows investors to bet on 64 of China’s tech firms. The Chinese “Cubes” have managed to produce a 9.89% annual return since inception in 2009. (For related reading, see: A Dragon-Sized Play In Chinese Tech.)

The Bottom Line

Asia’s tech sector is top-notch. It continues to grow and produce stellar innovations and products. For investors, ignoring it could be putting their portfolio in peril, especially since shares of Asian tech firms tend to be so cheap compared to their developed-market counterparts.

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