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ADB Expects Asia's Growth to Remain Steady: 3 Fund Picks

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The most-recent report released by the Asian Development Bank (ADB) on Dec 12 states that growth in Asia would remain steady despite global economic pressures. This can primarily be attributed to judicious policymaking practices followed in some of the large Asian economies.

ADB’s Chief economist Yasuyuki Sawada stated that the bank has kept the regional growth forecast unchanged for 2018 even as “some of the biggest economies [are] continuing to hold up well.” Under circumstances where the Asian economy is likely to remain strong, investing in mutual funds from the region seems prudent.

Asia’s Steadiness, A Show of its Resilience

In its latest report, the ADB projected that Asia’s economy is set to remain steady despite “external challenges.” This stems from the fact that countries in the region have witnessed robust domestic demand. Further, the report also mentions that inflationary pressures on such economies seem to be subsiding.

The current report is a supplement to the institution’s Asian Development Outlook (ADO) 2018 Update report. Also, ADB maintained its regional growth forecast for Asia of 6% in 2018 and 5.8% in 2019. The Manila-bank stated that if the newly industrialized economies of Asia are excluded, the region would witness growth of 6.5% in 2018 and 6.3% next year.

Meanwhile, the bank is of the view that low international commodity prices and consistent efforts by the central banks to curb market volatility would result in lowering inflationary pressures on Asia. ADB expects inflation in developing Asia to reduce to 2.6% in 2018 and 2.7% in 2019. This is a downward revision from the previous forecast of 2.8% in both the years.

Moreover, an uptick in public investment in the region and steadily increasing output from the Shah Deniz gas field would improve the overall economic conditions in developing Asia. Further, gross domestic product (GDP) in Central Asia was also revised upward to 4.3% in 2019 from 4.2% earlier.

The forecast for growth in South and Southeast Asia has been pegged at 7.1% and 5.1%, respectively, in the report.

3 Best Funds to Buy Now

Given such circumstances, we have highlighted four mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from ADB’s positive outlook for Asia. Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

T. Rowe Price Japan (PRJPX - Free Report) seeks capital appreciation in the long run by investing the majority of its assets in securities of companies based in Japan. PRJPX invests in various Japanese companies and industries, irrespective of their size.

This Sector - Japan - Equity product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 12.7% over the three-year and 8.9% over the five-year benchmarks. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRJPX has a Zacks Mutual Fund Rank#1 and an annual expense ratio of 0.97%, which is below the category average of 1.27%.

Matthews Asia Growth Investor (MPACX - Free Report) seeks to achieve its investment objective by investing the majority of its assets in preferred and common stocks of companies located in Asia. It may also invest in convertible securities of Asian companies. MPACX seeks capital growth for the long run.

This Sector - Pacific Rim-Equity product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.3% over the three-year and 5.6% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

MPACX carries a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.12%, which is below the category average of 1.21%.

Fidelity China Region (FHKCX - Free Report) invests the majority of its assets in securities of Hong Kong, Taiwan and China issuers and other investments that are tied economically to the China region. It invests primarily in common stocks.

This Sector – China-Equity product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 7.8% and 4.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FHKCX has a Zacks Rank #2 and an annual expense ratio of 1.00%, which is below the category average of 1.64%.

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