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With European woes and unemployment levels still remaining high in the U.S., investors have turned their attention to those economies which have reasonable growth.
In such an economic environment, Asia is one such continent which an investor can favor when compared to the developed economies. A rising consumer market and strong budget situation provide cushion to these economies in this otherwise shaky economic environment (Southeast Asia ETF Investing 101).
Basically investment in Asia revolves around three countries, namely, India, China and Japan. Although India and China have been growing slowly of late it is believed that these regions are in the mid-cycle of the slowdown and a recovery could be underway (Does Your Portfolio Need An India ETF?).
However, Japan is one region that an investor should give a second thought before investing. Unlike its rapidly growing counterparts, Japan is stuck in a low growth quagmire. The country is now approaching its third decade of near zero growth with little hope in sight for a turnaround.
Japan was trying to recover from 2011’s earthquake and Tsunami which devastated many parts of the country. But its recovery was hindered by a couple of reasons. Income for the country is largely tied to export. However, the euro zone crisis and weak recovery in the U.S. jeopardized the export market and made a recovery more difficult.
Given the grim realities of the Japanese market, investors can skew their portfolio from the land of the rising sun to other more promising Asian nations.
In this backdrop, investors seeking to invest in the broad Asian economy without any exposure to Japan can do it through a basket of stocks or ETFs. Here we would highlight the Zacks top ranked ETF providing exposure to Asia excluding Japan.
WisdomTree Asia Pacific ex-Japan Fund (AXJL - ETF report) is ranked Zacks Rank 1 or Strong Buy and we expect it to outperform its peers in a timeframe of one year meaning it could be an excellent pick for investors seeking more exposure to this slice of the market while also utilizing our new ranking system as well (Asia Ex-Japan ETF Investing 101).
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors. ETFs are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive one of three risk ratings, namely, Low, Medium, or High.
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks Rank reflects the expected return of an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio in Asia excluding Japan, we have taken a closer look at the top ranked AXJL below:
WisdomTree Asia Pacific ex-Japan Fund (AXJL)
The fund tracks the WisdomTree Asia Pacific ex-Japan Index which looks to focus on 300 large companies ranked by market capitalization that are incorporated in various parts of Asia. This not only excludes Japan from its product portfolio but also serves investors with an impressive dividend yield as well.
For a broad exposure to Asia along with a good dividend yield, AXJL is a great option. The fund has been able to provide a moderate level of diversification to investors as it holds 31% of the asset base in the top 10 holdings, suggesting a pretty spread out profile.
The ETF manages an asset base of $87.1 million and, despite a broad exposure to Asia and a good level of dividends, it does not seem to be very popular among investors as indicated by its extremely low trading volume. The ETF charges an expense ratio of 48 basis points and it generates a SEC 30-day yield of 3.39% (11 Great Dividend ETFs).
In terms of sector exposure, financials are a top choice for the fund with an asset allocation of 25.27%. Telecommunication services, materials and energy also enjoy double-digit shares with asset allocation at 21.9%, 11.2% and 10.3%, respectively.
The country-wise breakdown comprises Australia taking the top spot with 23.7% of investment while India is last on the radar with just 2.3% of investment (Australia ETF Investing 101). Other growing economies like Hong Kong and Taiwan are the second and third choices for the fund with double-digit allocations as well in this top ranked ETF.
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