The emerging markets of the Far East have always held a certain allure to adventurers. From the early European and Chinese traders to the modern day juggernaut hedge fund managers, many have sought and found their fortunes in this colorful, fascinating region.
The advent of International Exchange Traded Funds (ETFs) has opened Far East financial markets to everyone and not just swashbuckling investment adventurers. The Asian ETF market has sold off hard this year due primarily to the worldwide economic slowdown. However, since around the end of October, they are exhibiting a strong bounce off the lows. Is this a good time to buy into this region via ETFs? This article will attempt to answer this question by looking deeper at 3 of these popular investment vehicles.
^FXI^ – This Asian ETF tracks the FTSE/Xinhua China 25 Index. This index consists of 25 of the largest and most liquid Chinese companies. All of these companies trade on the Hong Kong Stock Exchange and are open to direct international investment. The Index is weighted with the largest companies having the most weight in the calculation. China Mobile Limited is currently the heaviest stock in the index carrying 10.19% of the total. The 52 week low was $19.35 and the high was $62.62/share. The stock has been uptrending since late November and is currently trading above its 50-day Simple Moving Average which is currently sitting at $26.22/share. Technical indicators seem to indicate that a bullish trend is in place.
^EWY^ – A Korean specific ETF that follows the Korean Morgan Stanley Capital Index. This fund is heavily weighted to the giant Korean computer/technology hardware maker, Samsung. In fact, Samsung makes up 19.05% of the index with the next heaviest weighted firm, POSCO, coming in at a distant 7.12%. Most of the companies in this index do not actively trade in the United States outside of risky pink sheet issues. Therefore, this ETF is the easiest way for the average investor to gain exposure to these companies. Korea pins its currency to the U.S. Dollar, so there is little exchange rate risk. However, the heavy weighting of hardware companies and Korea’s reliance on U.S. imports makes this ETF not well diversified. Technically, the stock has bounced hard off its lows of mid-November and is currently in a nice uptrend above the 50-day Simple Moving Average.
^PGJ^ – This PowerShares ETF definitely has the most Asian sounding name of the group. It is built upon the Halter USX China Index. This index is made up of companies listed in the United States with a majority of their revenue coming from China. The index was hit hard this year, dropping to a near $11.00/share low prior to bouncing back to nearly $15.00/share. It is currently trading above the 50-day Simple Moving Average and the other technical indicators are showing a slight bullish bias.
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund. Read his blog at marketsurfer.com.