Find Growth In Asia

With the European Crisis still not reaching a real conclusion and worries about our own economic recovery casting shadows of doubt on the markets, many investors are once again seeking shelter in short term bonds, iShares Lehman 1-3 Year Bond (NYSE:SHY), and gold, ETFS Gold Trust (NYSE:SGOL). Investors are once again snubbing emerging markets as too risky and many have fallen in line with the general market place. However, just as with the credit crisis of 2008, these nations are quickly becoming long-term bargains.

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Out Flows in Asia
From the start of the year through May, Asian nations experienced huge inflows of foreign direct investment. Japan saw capital infusions of nearly $3 billion. Other nations, such as China, India and South Korea, also saw large increases in investment. However, starting in June, China was the only ASEAN nation to receive any sort of significant foreign investment. Investors are worried about how the European Unions current woes will impact trade with Asia. The European Monetary Union is actually a bigger portion of Chinas and India's overall trading pie than the United States. These worries have caused the stoppage in investing and created a temporary hiatus in rising Asian asset prices.

Asia Still Makes Sense
The recent drop in asset prices makes Asia a prime target for investors because the long-term growth story hasn't changed. A burgeoning middle class, increasing incomes and growing domestic consumption are hallmarks of the region. Recent reports from Merrill Lynch are helping prove this. The number of Asian households with investable assets over $1 million jumped nearly 26% in 2009. Overall estimations from the IMF, peg Asia's economy at nearly 50% larger within five years, at a rate of purchasing power parity. The expansion will account for almost one-third of total global output.

Over the short term, optimism is high. Lower commodity prices caused by the E.U. debt woes and stifled demand will benefit trade and lessen inflation problems.

Asia as a Portfolio Play
Investment in Asia usually comes in flavors; developed and emerging. Combining the developed market Vanguard Pacific Stock ETF (NYSE:VPL) and the emerging market based SPDR S&P Emerging Asia Pacific (NYSE:GMF) gives investors a wide swath of the entire region. Aside from giants China and India, which can be accessed through funds such as the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), the region is quite diverse in respect to its nations. Each comes with their own set of risks and rewards. Investors may want to take advantage of these and invest in the individual growth stories.

Singapore
Singapore represents a more developed nation with political stability. Investors worried about currency fluctuations within the region should take comfort in the nation's currency policy. Singapore uses a managed float policy against a basket of trading partner's currencies. Its well managed budget and recent GDP growth of nearly 16% make the Asian nation one of the future superstars in the region. The iShares MSCI Singapore Index (NYSE:EWS) follows a basket of 31 stocks concentrated in the financial sector. The ETF yields 3% and charges 0.55%.

Indonesia
Some see Indonesia as the "next China" as the two nations share many of the same characteristics. Indonesia recently received a debt upgrade from Moody's, to positive from stable to reflect the country's "capacity for sustained strong growth and the overall stability and effectiveness of its fiscal and monetary policies". The nation's Jakarta Stock Exchange has been one of the continents better performers as Indonesia's central bank has kept interest rates at a record low 6.5%. The iShares MSCI Indonesia (NYSE:EIDO) and the more popular Market Vectors Indonesia ETF (NYSE:IDX) are the two ways to play the nation.

Vietnam
Investors wanting to play more of frontier Asia, Vietnam represents the potential of the region. Its proximity to China combined with lower wage costs, make ideal as play for Chinese "off-shoring". Recent labor disputes within mainland China are helping to strengthen this possibility. The Market Vectors Vietnam ETF (NYSE:VNM) is the only pure play on the country.

Bottom Line
With the world bracing itself for another potential crisis, emerging markets have seen their stock prices fall. However, in terms of Asia, this might be a buying opportunity for long-term investors. The growth story for the region is compelling and is accessible through many means. Exchange traded funds, such as the iShares MSCI Thailand Index (NYSE:THD), offer an easy way to add exposure to the region. (For more on Asia's influence on the financial markets, check out Dragons, Samurai Warriors And Sushi On Wall Street.)

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