China’s producer price index (PPI) rose 7.8% in February from a year earlier, slightly more than analysts’ estimates of 7.7%, and at the fastest pace since September 2008 per the National Bureau of Statistics. These gains were mainly driven by the mining and heavy industry, which witnessed a gain of 36.1%. Iron ore and steel prices have been increasing in China for over a year due to the construction boom. Even though surveys indicate that manufacturers were able to pass on some of the higher costs to the end consumers by raising prices, there is little to no evidence of it yet.
The consumer price index (CPI) rose just 0.8% year over year in February, which was half of analysts’ estimates of 1.7%, and down from 2.5% in January. This was mainly due to a sharp fall in food prices, down 4.3% year over year, owing to Lunar New Year celebrations.
Asian markets tumbled in response to the release of price index data. Markets across China, Hong Kong, Australia, South Korea, and Taiwan, each saw declines on March 8, 2017. Japan was the only winner after a weaker yen spurred gains in Japanese equities due to a better-than-expected U.S private jobs data.
However, China posted its first monthly trade deficit in three years, with exports falling 1.3% and imports rising 38.1%. The trade deficit was to the tune of $9.2 billion.
Following the upbeat trade data, markets across Asia staged a recovery, flushing away previous losses. However, the news of a big buildup in oil inventories in the U.S sent major Asian markets to the red again at the close of trade on March 9, 2017.
Following South Korean President Park Geun-hye's impeachment ruling on March 10, 2017, markets picked up steam. South Korean Kospi gained 0.17%, Shanghai Composite was down 0.03%, Hang Seng was down 0.8%. ASX 200 was in the green zone with a 0.56% gain. Japan’s Nikkei 225 was sharply up, staging a gain of 1.25% owing to a weaker yen.
Keeping the current scenario in mind, the following ETFs, with significant exposure to Asian equities, are in focus:
This fund is a good bet for investors looking to gain exposure to Asian economies. It is heavy on China and South Korea, which take the top two spots with almost 60% allocation collectively. The fund is concentrated among its top 10 holdings, with around 30% allocated to the same.
EEMA has an annual expense ratio of 49 bps. The fund manages $304 million worth of AUM. It is a relatively liquid holding with a volume of 64,000 shares a day. The fund returned 10.35% in the year-to-date timeframe and 20.33% in the past one year. EEMA currently has a Zacks Rank #3 (Hold) with a Medium Risk outlook (read: 5 Reasons Why Emerging Market ETFs Will March Higher
This ETF offers exposure to large caps in major Asian economies. It is an interesting bet but comes with significant concentration risk. China and South Korea take the top two spots with 32% and 26% allocation, respectively. Hong Kong and Taiwan have an exposure of 17% each. Around 56% is allocated to its top 10 holdings.
AIA has an annual expense ratio of 50 bps. The fund manages $334 million worth of AUM. It is a relatively liquid holding with an average volume of around 43,000 shares a day. The fund returned 9.47% in the year-to-date timeframe and 27.53% in the past one year. AIA currently has a Zacks Rank #3 with a Medium Risk outlook (read: Asia ETF Hits New 52-Week High
This fund offers an exposure to gain from holdings spread across major Asian economies. Therefore, it may appeal to investors who believe that Asian markets will outperform the global equity markets. Japan and China have almost 70% of total assets allocated to them, while Australia has a 10% allocation. It bears concentration risk, with 56% allocated to its top 10 holdings.
ADRA has an annual expense ratio of 30 bps. The fund manages $21 million worth of AUM. It is a relatively illiquid holding with an average volume of just around 1,300 shares a day. The fund has returned 7.20% in the year-to-date timeframe and 20.02% in the past one year. ADRA currently has a Zacks Rank #3 with a Medium Risk outlook.
Amid high geopolitical uncertainty and possible trade conflicts, the fate of the Asian economies is quite uncertain. Hence, it is best to remain on the sidelines for now.
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