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Asia ETFs Back in Focus as Markets Rally

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As the trade war gets some relief with both United States and China willing to discuss and negotiate further, Asian stocks got a positive stimulus and have rallied on Jul 12. U.S. stocks also rebounded as the technology sector performed extremely well.

Factors Affecting Markets

The last week saw the United States slap tariffs on $34 billion of Chinese goods. China retaliated with tariffs of the same amount. Even as the economic powerhouses carry on their tit-for-tat policy, a sign of recovery in the Chinese economy has brushed off fears for the time being and has improved sentiments in the Asian markets.

Analysts have increased their growth forecasts for the Chinese economy for 2018, as they found that the “deleveraging drive” and the pollution crackdown on factories had a much lesser impact than expected.

Although investors are still worried about the standoff between two most powerful nations they are hoping that escalation might be avoided if discussions continue. The U.S. Treasury Secretary Steven Mnuchin was of the opinion that “bilateral talks on trade could resume on the condition that China was open to making serious efforts to change (read: China ETFs: Buy the Dip?).”

Optimism on Strong U.S. Data

Strong economic data from the U.S. has also improved investor confidence globally and made the stocks rally. The United States has added 213,000 jobs in June beating the estimate of 195,000 even though the unemployment rate has slightly increased to 4%.

The Institute for Supply management has come out with a report that the national factory activity jumped to 60.2 in June compared to 58.7 in May. This indicates an increase in manufacturing activity, which contributes 12% to the U.S. economy (read: How is the Current Trade Scenario Impacting Asia ETFs?). 

Residential construction increased to 1.35 million, per U.S. Census Bureau, which is an increase of 5% compared to April data of 1.286 million. Single-family homebuilding, which controls the largest share of the housing segment, increased 3.9% to a rate of 936,000 units in May.

So, the overall optimism increased bargain buying, which led to a jump in the popular indexes in Asia.

Given the new-found optimism in the Asia market, investors may consider investing in the below-mentioned ETFs. These funds have been steady in the past week (as of Jul 12, 2018).

Invesco BLDRS Asia 50 ADR Index Fund (ADRA - Free Report)

The fund tracks the performance of the BNY Mellon Asia 50 ADR Index. The fund has AUM of $21.6 million and trades an average daily volume of 1275 shares.  It has 50 stocks in its holdings. Information Technology, Financials and Consumer Discretionary are the top three sectors in this fund, with weights of 36%, 23.3% and 22.8%, respectively. China and Japan are the top countries where the fund has exposure to, with both making up 67% together. Alibaba (BABA) AND Toyota Motor Corp (TM) is the top individual stocks together holding around 25% of the fund. It has an expense ratio of 0.30% and Zacks ETF Rank #3 (Hold) with a Medium risk outlook. The fund has gained 2.62% in the past week.

Invesco China Real Estate ETF (TAO - Free Report)

The Invesco China Real Estate ETF tracks the investment results of the AlphaShares China Real Estate Index. It has assets worth $63.1 million in its basket and trades an average daily volume of 33955 shares. The fund has an annual fee of 70 basis points and has 67 holdings in its basket. In terms of individual stocks, none has holdings more than 6%. The fund has gained 2.26% in the past week.  

Xtrackers MSCI AC Asia Pacific ex Japan Hedged Equity Fund (DBAP - Free Report)

The fund seeks investment results of the MSCI Asia Pacific ex Japan US Dollar Hedged Index. It has gathered assets worth $4.2 million and trades an average daily volume of 1410 shares. The fund has 716 holdings in its basket. As for sector outlook, Information Technology and Financials are the most prominent sectors together holding nearly 50% of the fund. China leads in terms of country exposure with 30% weights while the next four countries make up another 50% in the fund. The fund has an annual expense of 60 basis points and carries a Zacks ETF Rank #3 with a Medium risk outlook and has gained 1.98% in the past week (read: Will EM & Asia Outperform U.S. ETFs in the Year of Dog?).

First Trust Asia Pacific ex-Japan AlphaDEX Fund (FPA - Free Report)

The fund tracks the results of the NASDAQ AlphaDEX Asia Pacific ex-Japan Index. It has AUM of $48.1 million and trades an average daily volume of 9900 shares. FPA has 100 holdings with none having more than 3% weights. Real Estate, Consumer Discretionary and Materials are the top sector allocations with weights of 30%, 15% and 11% respectively. South Korea, Hong Kong and Australia are the top country exposures with weights of 37.1%, 32.5% and 21.2% respectively. It has a high expense ratio of 0.80% annually and a Zacks ETF Rank #3 with a Medium risk outlook. The fund has gained 1.86% in the past week.

WisdomTree Asia-Pacific ex-Japan Fund (AXJL - Free Report)

The fund seeks investment results of the WisdomTree Asia Pacific ex-Japan Index. It has assets under management of $43.3 million and trades at an average daily volume of 3500 shares. As for individual stocks none has weight of more than 8%. The fund is heavily concentrated on the top five (Financials, Information technology, Telecommunications, Materials and Energy) and together make up around 75%. In terms of country exposure Australia, Hong Kong, Taiwan and China comprise the top four countries in terms of geographical exposure together making up approximately 75%. The fund has a modest fee of 48 basis points annually and has gained 1.83% in the past week. It has a Zacks ETF Rank #3 with a Medium risk outlook.

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