Southeast Asia is often overlooked by investors due to its proximity to investment darlings China and India. The latter are members of the well-known BRIC countries and therefore get the majority of the fanfare when it comes to viable investment opportunities.
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In the most recent IMF World Economic Outlook, the ASEAN-5 countries are predicted to grow GDP by 5.4% this year and another 5.7% in 2012. The numbers remained constant from a prior report even though the federation lowered the world GDP. The five nations include Vietnam, Malaysia, Thailand, Indonesia and the Philippines. Many also include Singapore when referring to ASEAN.
Investing in the entire region can be accomplished with the Global X FTSE ASEAN 40 ETF (NYSE:ASEA). The country breakdown for the ETF is Singapore (41%), Malaysia (30%), Indonesia (17%), Thailand (12%) and Philippines (<1%). As you can see, Vietnam is not a part of the ETF and Singapore is included. The ETF focuses heavily on the financial sector (41%), telecoms (13%) and energy (10%). The ETF charges an expense ratio of 0.65%.
Individual Country ETFs
Investors that want to build their own ASEAN portfolio can choose to do so by choosing which countries are included. To invest in Singapore there is the iShares Singapore ETF (NYSE:EWS), which has been trading since 1991. The ETF is heavily invested in the financial and industrial sector, which together make up 71% of the allocation. There are a total of 33 stocks with an expense ratio of 0.53%. The GDP for Singapore is expected to increase by 6.2% in 2011 and 5.5% in 2012.
The iShares Malaysia ETF (NYSE:EWM) hit a new all-time high last week, breaking the 1997 record. The ETF is up about 7% in 2011 and the chart is one of the best of all emerging market countries. Similar to EWS, about half of the ETF is weighted towards the financial and industrial sectors. There are a total of 44 stocks with an expense ratio of 0.53%. The IMF estimate is for 5.5% GDP growth in 2011.
One of my favorite countries is the fourth most populous country in the world: Indonesia. The GDP growth estimate of 6.2% and the strong trend in the countries stock market make for an interesting investment option. The Market Vectors Indonesia ETF (NYSE:IDX) is composed of 39 stocks with about one-third in the financial sector. Energy and consumer discretionary are also at the top of the allocation list. The annual expense ratio is 0.60% and the ETF is just off a 2011 high.
Thailand experienced a major rally earlier this week after results from an election went in favor of investors. In the last week the iShares Thailand ETF (NYSE:THD) jumped 10% from a four-month low. The ETF is composed of 87 stocks with financials making up one-third, but energy is close behind with 32% of the allocation. The annual expense ratio is 0.62%. The estimated GDP for 2011 is the lowest of the ASEAN countries, but still impressive at 4.5%.
The Philippines have minimal exposure in ASEA, but there is the iShares Philippines ETF (NYSE:EPHE) that concentrates solely on the country. Often overlooked, the country is expected to grow GDP by 5% in 2011 and could be one of the gems of the next decade. The ETF is composed of 35 stocks with a heavy concentration in financials (43%) and utilities (20%). The annual expense ratio is 0.65% and the ETF has recently rallied in conjunction with the Thailand election results.
With no exposure in ASEA, the only way to get some money into Vietnam is through the Van Eck Vietnam ETF (NYSE:VNM). The ETF is taking a beating in 2011 and began a downtrend in October 2009 as the rest of the world has moved in the opposite direction. The GDP estimates are at 6.2%, the best of the group, but that has not been enough to help the ETF stave off selling. A big issue has been inflation above 16% during the first half of 2011. The ETF is composed of mainly financial and energy stocks and charges an expense ratio of 0.76%. (Learn why it may be profitable to invest in beaten down stocks in Buy When There's Blood In The Streets.)
ASEA vs. Country ETFs
For most individual investors the best choice for investing in the ASEAN region is through the broad-based ETF, ASEA. However if you feel you want to gain exposure to Vietnam and Indonesia, but want to avoid Singapore the only choice is to build your own ASEAN portfolio through single-country ETFs. Both strategies should realize a stop-loss plan must be in place before buying.
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