Time To Bet On The Far East With These ETFs (CHIQ, FXI, EWJ, EWT, EWY, EWH, EWS, IDX, VNM, THD)
Tony Sagami: The Japanese attack on Pearl Harbor on December 7, 1941, may have brought the U.S. into war against the Japanese, but Japan had been waging war against much of Asia for a decade before that.
In fact, there was one battle in particular that took place shortly after Pearl Harbor that provided one of history’s greatest lessons … not just for countries at war, but for investors for generations to come. Specifically, for investors in Asia-focused plays.
Today I’ll share with you a dozen ways to add some Asian spice into your portfolio. But first, let’s look at how a stealthy military attack that took place 70 years ago can teach you to prepare your portfolio for battle going forward!
Don’t Put Your (Financial) Empire at Risk
Japan invaded Manchuria in Northern China in 1931 and advanced deep into China by 1937. By 1940, Japan had invaded French Indochina (today’s Vietnam) and marched into Malaysia, which was part of the British Empire at the time.
Great Britain had installed a major military and naval base at the southern tip of Malaysia, where Singapore stands today. This was the most-important military outpost in the British Empire outside of Britain itself.
As such, it would be the most-critical location to protect from all sides. Right?
Well … if they had, we wouldn’t be talking about this today!
The Big Lesson We Can Learn from Singapore
The British base in Singapore was on high alert for a Japanese attack. If that attack came, then the British were certain that it would be by sea … and they prepared accordingly.
The dense Malaysian jungle and mangrove swamps made it seemingly impossible for a land attack from the north. However, the Japanese completely caught the British by surprise when they attacked by land … marching 550 miles down the Malay Peninsula in 55 days and invading Singapore on February 15, 1942.
The attack force was 65,000 strong — considerably smaller than the 90,000 British, Indian and Australian troops — but Singapore quickly fell because it was completely unprepared for a land attack.
The British had loaded their guns with armor-piercing shells designed to penetrate warships instead of high-explosive shells to repel land invaders. But even more importantly, they had all their big guns facing the wrong way.
Singapore lost the battle because they had their guns pointed the wrong way. Similarly, I fear that most investors are about to lose an investment battle because their portfolio guns are pointed the wrong way.
Where Should Your Investment Guns Be Pointed?
According to the economists at the Asian Development Bank (ADB), that answer is Asia.
The ADB just released its Asian Development Outlook 2012 report and painted a very rosy picture for Asia — praising the region for its shift toward a “more sustainable long-run growth path.”
The ADB forecasts that emerging Asia (excluding Japan and South Korea) will grow by 6.9% in 2012 and then accelerate to 7.3% in 2013.
It expects China, the world’s second biggest economy, to grow by 8.5% this year and by 8.7% in 2013. According to the report …
“Despite the weak global environment, developing Asia’s growth momentum continues. Strong domestic demand provided necessary support in 2011; this will need to continue in light of the soft export demand expected from the major industrial economies of the United States, euro zone and Japan.
“At the same time, Asian economies are gradually diversifying into new markets, private consumption is trending up and the region has limited direct financial exposure to the euro zone, which should help sustain its momentum. The stronger trend in domestic consumption — in a group of countries known for high savings rates — could be seen in the region’s current account surplus.”
China’s Consumers Are Key to Growth, Gains
I’ve reported here that the key to making money in China is to focus on companies that are profiting from rising domestic consumption and retail sales.
The World Bank’s lead China economist, Ardo Hansson, agrees: “The bright spot in the (Chinese) economy has been consumption, which has remained strong.”
The Chinese economy is undergoing an intentional, MONUMENTAL transformation from an export-dependent manufacturer of low-margin trinkets to a consumption-driven economy powered by its own internal growth.
China’s leaders don’t like being dependent on the west for its exports, so it is intentionally focusing on growing its internal domestic demand.
China’s 12th Five-Year Plan (2011-2015) prioritized more-equitable wealth distribution, increased domestic consumption, improved social infrastructure, and social safety nets. The plan is representative of China’s efforts to shift its emphasis toward domestic consumption.
Time to Point Your Investment Guns to the Far East
What you need to do is get “long” whatever the Chinese are buying. And when it comes to Chinese consumers, all it takes is a walk down any major street to see what’s hot.
I see more Louis Vuitton handbags in Beijing than I do in Boston. I see more Apple iPhones glued to ears in Shanghai than in Seattle. And I see more customers lined up at KFC stores in Hong Kong than in Houston.
Those are just a few of the examples of western companies that are doing gangbuster business in Asia and carting wheelbarrows of profits to the bank. The pure-play Chinese companies are doing even better, though.
For a list of Chinese companies to consider, take a look at the holdings of the Global X China Consumer ETF (NYSEARCA:CHIQ). CHIQ is packed with China’s most-successful retailers.
What you need to do is invest where the shopping malls are packed and the consumers are confident, happy and spending. That, my friend, is across the Pacific Ocean.
While I much prefer crafting a targeted portfolio of carefully selected stocks for my Asia Stock Alert subscribers, I understand that some investors prefer Exchange-Traded Funds (ETFs) and mutual funds over individual stocks.
ETFs are an easy, simple and relatively inexpensive way to put some Asian spice into your portfolio (compared to buying all of their component stocks). Below is a list of 12 ETFs that can give you the opportunity to target specific countries.
- iShares FTSE Xinhua China 25 (NYSEARCA:FXI)
- iShares MSCI Japan (NYSEARCA:EWJ)
- iShares MSCI Taiwan (NYSEARCA:EWT)
- iShares MSCI South Korea (NYSEARCA:EWY)
- iShares MSCI Hong Kong (NYSEARCA:EWH)
- iShares MSCI Singapore (NYSEARCA:EWS)
- Market Vectors Indonesia (NYSEARCA:IDX)
- Market Vectors Vietnam (NYSEARCA:VNM)
- iShares Thailand (NYSEARCA:THD)
- iShares Malaysia (NYSEARCA:EWM)
- iShares Philippines (NYSEARCA:EPHE)
- iShares India (NYSEARCA:INP)
Now, I’m not suggesting that you run out and invest in any of those securities tomorrow morning. As always, timing is everything, so I recommend that you wait for my buy signal in Asia Stock Alert.
Asia, however, should be the cornerstone of your portfolio and where I fully expect to make the biggest stock market profits.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended inUWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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