In this piece, we will take a look at the 12 best Asia ETFs to buy. If you want to skip our analysis of the current economic environment in Asia, then take a look at the 5 Best Asia ETFs to Buy.
Asia is one of the hottest topics in the global financial industry these days. This is primarily due to the economic woes of China, whose growth and economic recovery has disappointed investors and analysts. China was slated to account for a large portion of global growth in 2023 after a high interest rate and inflationary environment sapped business sentiment last year. However, the Asian giant's structural economic problems, a lot of which have to deal with its property sector, have left it limping to growth and recent measures by the government to stimulate growth have generated only a lukewarm response.
Trouble in the Chinese real estate sector continues as we enter the third week of September. The key question on everyone's mind when it comes to China is the real estate sector, and other concerns about the country, such as its friction with the West, have made investors wary of utilizing cheap valuations in China and starting the money flow. To understand the scope of investor pessimism surrounding the country, consider a Bloomberg analysis of data from the Chinese central bank. This data shows that from December 2021 to June 2023, a whopping $188 billion of foreign investments have moved away from Chinese debt and equity. To make matters worse, the publication believes that $12 billion in funds moved out of Chinese equity in August alone - solidifying the pessimistic run that has also seen the U.S. dollar soar to new highs due to a flight to safety. Additionally, funds are also excluding China from their emerging markets equity portfolios, with most ascribing the shift to the country's friction with the U.S.
Taking a look at the Hang Seng China Enterprises Index, the share price performance over the past five years is simply stunning. The index, which is made up of top Chinese private and public sector stocks, is down by 43% over the past five years, down by 2% over the past 12 months, and down by 9% year to date. The latest selloff in the index took place in September as investors were wary of key events in the Chinese real estate industry that would see a key player repay dollar debt and seek an extension on Yuan debt. On the positive side of things though, data from the Chinese National Bureau of Statistics (NBS) shows that industrial output grew by 4.5% annually in August, which was an uptick over the growth rate of 3.7% in July and also higher than economist estimates. Retail sales also grew by 4.6% which nearly doubled over the July growth figures and also significantly topped analyst estimates.
The promising data set also shifted some sentiment for the Chinese economy at key banks. These two are JPMorgan Chase & Co. (NYSE:JPM) and Australia and New Zealand Banking Group (ANZ Bank). Both of them increased their forecasts of the Chinese economy in mid September, with JPMorgan now expecting China to grow by 5% and ANZ Bank expecting 5.1% growth. JPMorgan is optimistic about the recent promising data and the government's stimulus, and it believes that the measures will translate into economic performance over the coming months.
At this point, you might be wondering if there are other countries in Asia apart from China. Well, for broader developing Asia, the Asian Development Bank (ADB) is quite optimistic. It believes that the region is slated to grow at 4.8% this year aided primarily by local demand. However, since developing Asia also needs to export products to the West, a slowdown in Western economies has hurt their GDP this year. The fastest growing Asian region in 2023 and 2024 will be South Asia, with the ADB projecting 5.5% growth this year and 6.1% growth next year, which is significantly higher than the growth for the region as a whole.
Finally, and since this is a piece about the best Asia ETFs to buy, the perfect conclusion to our introduction comes from the well known ETF provider VanEck's opinion about the future of India. India, which is the most populous country in the world, has been in the news for quite some time this year. Investors have started to become increasingly optimistic about India as China's economy stutters, and according to VanEck's chief economist for emerging markets Natalia Gurushina, structural changes to the Indian economy such as the growth in the amount of digitization will ensure that the country is one of the strongest contenders for investment in the developing and emerging markets sector.
With these details in mind, let's take a look at the best Asia ETFs out of which the notable picks are WisdomTree India Earnings Fund (NYSE:EPI), iShares MSCI India Small-Cap ETF (BATS:SMIN), and Franklin FTSE India ETF (NYSE:FLIN).
Best Asian ETFs to Buy
Photo by Ruben Sukatendel on Unsplash
Our Methodology
To compile our list of the best Asia ETFs, we first made a list of the 25 largest Asia Pacific ETFs in terms of their total assets and then ranked them by their three year annualized returns. Out of these, the ETFs with the highest returns were picked for our list of the best Asia ETFs.
Best Asia ETFs to Buy
12. iShares Core MSCI Pacific ETF (NYSE:IPAC)
Annualized Return Over 3 Years: 3.51%
iShares Core MSCI Pacific ETF (NYSE:IPAC) invests in firms that are operating in Asia Pacific. It has $1.6 billion in net assets and was set up in 2014. The ETF has a price to earnings ratio of 15.29 and it has invested in more than 1,500 companies. As the title suggests, the iShares Core MSCI Pacific ETF (NYSE:IPAC) is part of the iShares fund family. Its top three investments are in the Japanese auto manufacturer Toyota Motor Corporation, the Australian mining giant BHP Group Limited (NYSE:BHP), and the Commonwealth Bank of Australia.
iShares Core MSCI Pacific ETF (NYSE:IPAC) joins iShares MSCI India Small-Cap ETF (BATS:SMIN), WisdomTree India Earnings Fund (NYSE:EPI), and Franklin FTSE India ETF (NYSE:FLIN) in our list of the best Asia ETFs to buy based on historic returns.
11. JPMorgan BetaBuilders Developed Asia Pacific ex-Japan ETF (BATS:BBAX)
Annualized Return Over 3 Years: 4.19%
The JPMorgan BetaBuilders Developed Asia Pacific ex-Japan ETF (BATS:BBAX) is part of the JPMorgan funds family and has $4 billion in net assets. The fund was set up in 2018 and it has a price to earnings ratio of 13.80. The fund invests primarily in value companies with large market capitalization. and it is rated four out of five stars by Morningstar Financial. It limits itself to investing in companies that are located primarily in the developed Asia Pacific, or in Hong Kong, Singapore, New Zealand, and Australia.
10. iShares MSCI Singapore ETF (NYSE:EWS)
Annualized Return Over 3 Years: 4.40%
The iShares MSCI Singapore ETF (NYSE:EWS) is an ETF part of the iShares fund family. It limits itself to investing in Singaporean firms and has net assets that are worth $488 million, making it one of the smallest ETFs on our list of the best Asia ETFs. Despite this, the fund has delivered 4.40% in three year daily total returns. The iShares MSCI Singapore ETF (NYSE:EWS) is also one of the oldest ETFs on our list since it was set up in 1996. The fund's top three investments are in DBS Group Holdings Ltd, Oversea-Chinese Banking Corp Ltd, and United Overseas Bank Ltd.
9. iShares MSCI Australia ETF (NYSE:EWA)
Annualized Return Over 3 Years: 7.23%
The iShares MSCI Australia ETF (NYSE:EWA) is another iShares ETF and one that targets Australian companies. It is larger than the Singaporean ETF, due to its $2 billion in net assets. The fund was also set up in 1996 and it has a P/E ratio of 13.15. It tracks the MSCI Australia index and has investments in 59 companies. Out of these, the top three picks are BHP Group Limited (NYSE:BHP), Commonwealth Bank of Australia, and CSL Ltd.
8. iShares MSCI Taiwan ETF (NYSE:EWT)
Annualized Return Over 3 Years: 7.62%
The third iShares fund on our list, the iShares MSCI Taiwan ETF (NYSE:EWT) focuses on investing in firms in the disputed region of Taiwan. Taiwan is one of the hottest topics in the press these days, due to its proximity and geopolitical conflict with China and the ability of this conflict to hamper global economic growth and well being by disrupting crucial semiconductor supplies. The ETF has net assets of $3.28 billion and it was set up in 2000. Unsurprisingly, the Taiwan Semiconductor Manufacturing Company (TSMC) is its biggest investment as the fund has bought the chip maker's shares that are traded on Taiwan's stock exchange. TSMC's shares also trade in America as ADRs under the ticker NYSE:TSM.
7. Franklin FTSE Taiwan ETF (NYSE:FLTW)
Annualized Return Over 3 Years: 8.60%
Franklin FTSE Taiwan ETF (NYSE:FLTW) is one of the smallest ETFs on our list since it has a modest $178 million in net assets. Part of the Franklin Templeton Investments fund family, it tracks the FTSE Taiwan Capped Index and the top three investments are in TSMC, Apple's supplier Foxconn, and MediaTek Inc.
6. iShares MSCI Indonesia ETF (NYSE:EIDO)
Annualized Return Over 3 Years: 9.63%
The iShares MSCI Indonesia ETF (NYSE:EIDO) tracks the MSCI Indonesia IMI 25/50 Index and it has $470 million in net assets. It invests in a blend of value and growth companies, and its average P/E ratio is 10.93. The top three stock picks for the Indonesia ETF are PT Bank Central Asia Tbk, PT Bank Rakyat Indonesia (Persero) Tbk, and PT Bank Mandiri (Persero) Tbk.
WisdomTree India Earnings Fund (NYSE:EPI), iShares MSCI Indonesia ETF (NYSE:EIDO), iShares MSCI India Small-Cap ETF (BATS:SMIN), and Franklin FTSE India ETF (NYSE:FLIN) are some top Asia ETFs.
