McCall’s Call: Beyond The China Juggernaut

January 26, 2011

In all the talk about China, it’s easy to forget how many other Asian countries are worthy of investors’ attention.

 

The recent visit to the U.S. by China’s President Hu Jintao has stirred up a bevy of emotions from political as well as market pundits. The debate over whether China is a viable investment opportunity for U.S. investors has gone on for years and will continue well into the next decade.

Matthew D. McCallUnfortunately, in all this talk, a large number of investors focus on China when they search for opportunities in Asia, and therefore ignore the handful of other investable countries.

Of the four Asian Tiger countries—Hong Kong, Singapore, South Korea and Taiwan—my favorite is stable, and rapidly expanding, Singapore.

The city-state reported GDP growth of 10.6 percent year-over-year in the third quarter of 2010. Looking ahead to 2011, most estimates have the country growing at 4 to 6 percent, led by the financials and services sectors.

Asian Tiger ETFs

Investing in Singapore is easy through the iShares MSCI Singapore Index Fund (NYSEArca: EWS), which is a basket of 32 stocks with a heavy concentration on the financials sector (46 percent). The ETF had a solid 2010, gaining 35 percent and coming close to the all-time high set in 2007. It has an annual expense ratio of 0.55 percent.

Taiwan reported GDP growth of 9.8 percent during the third quarter of 2010, easily beating estimates. However, the government agency lowered its 2011 growth estimates to 4.51 percent from 4.64 percent. The rise in GDP was led by a 21.9 percent increase in exports during the quarter. Two-thirds of the company’s economic output comes from exports, which explains the strong growth.

The iShares MSCI Taiwan Index Fund (NYSEArca: EWT) is composed of 124 stocks, but the top two holdings make up 21 percent of the allocation. Those companies, Taiwan Semiconductor (NYSE: TSM) and Hon Hai Precision Industry (Taiwan: 2317), have been a major factor in the ETF’s 20 percent gain in 2010. The country and the ETF lean heavily on the information technology sector; 57 percent of the ETF invests in tech-related stocks. EWT’s annual expense ratio is 0.71 percent.

South Korea is about as developed as Taiwan and is easily as hot. South Korea is about where Japan was in the late 1970s, and the ETF targeting that country, the iShares MSCI South Korea Index Fund (NYSEArca: EWY) is up more than 20 percent in the past year. Its expense ratio is 0.61 percent.

 

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