As you know, I’m a fan of emerging markets and a big proponent of exchange trades funds (ETFs). They fit together almost perfectly. Today I want to focus on one fast-growing region that is getting more and more attention as Western economies crumble: Southeast Asia. As you’ll see, ETFs give you some exciting new ways to get involved in this booming part of the world.
Southeast Asia Has Several Key Attractions for Investors
Add up all the countries that are south of China, east of India and north of Australia and the total population is around 600 million. That’s twice the size of the United States — without even counting China and India.
Abundant Natural Resources
Southeast Asia has been supplying natural resources to the rest of the world ever since Indian and Arab merchants pioneered the “Spice Trade” thousands of years ago. Now the region exports rice, rubber, crude oil, metals, textiles, and more. It’s no stretch to say that the industrialized world is built on materials from Southeast Asia.
The nations of Southeast Asia straddle the critical shipping routes between China, Japan, India, Africa, the Middle East and Europe. Pirates have long sailed these waters because they know ships with valuable cargo have little choice but to pass through here.
Plus there is its proximity to China. Being on the doorstep of such a huge, dynamic economy while it catches up to the industrialized world is quite an advantage.
Playing SE Asia with ETFs
It used to be tough to invest in Southeast Asia. Even if you had the skill to pick individual stocks, you still had to open a brokerage account that could execute trades on third-world exchanges. This was too much trouble and risk for most people.
Now there is a better way: ETFs that give you quick, diversified exposure to the stock markets of key regional players like Indonesia … Thailand … Vietnam … and more!
With ETFs like the ones I name for you below, you can get a selection of fast-growing foreign companies with one simple trade on the U.S. markets.
Ready for the list? Here we go:
With a population of about 240 million, Indonesia is the largest country in the region by a wide margin. The local economy is growing at an astonishing pace. Huge crude oil reserves are a big help, but Indonesia is an economic powerhouse even without that sector.
You can pick from two different U.S.-based ETFs if you want to get a piece of Indonesia. Market Vectors Indonesia (NYSE:IDX) is by far the largest and most popular. IDX jumped an amazing 64.1 percent in the year ending June 2010. iShares MSCI Indonesia (NYSE:EIDO) is a newer alternative that also looks good.
Thailand is another important player. Despite a little recent instability, I think the long-term prospects for this market are amazing. Thailand is the “anchor economy” for neighboring countries Laos, Myanmar and Cambodia, making it the dominant force in its own mini-region.
The easiest way for an American to get involved with this growth is via iShares MSCI Thailand (NYSE:THD). Volatile? You bet, but the kind of growth THD has seen since its low in late 2008 is hard to find in the Western world.
A third top selection is Malaysia, which is working hard to transition itself from an economy based on mining and agriculture to a modern industrial exporter. The glittering skyline of Kuala Lumpur is evidence that Malaysia is well on the road to success.
U.S. investors can buy into Malaysia with iShares MSCI Malaysia (NYSE:EWM). For the five years ending June 2010, EWM had an average annual total return of 14.7 percent. The S&P 500 was actually down slightly in the same period!
Vietnam is back on the world’s radar screen in a big way. After being politically isolated for decades, the country joined the World Trade Organization in 2007 and is quickly becoming an economic force in the region. Vietnam’s young population and enterprising spirit provide good reasons to be optimistic about the future.
Market Vectors Vietnam (NYSE:VNM) includes a variety of financial, energy, industrial and consumer stocks. Yes, it took a big tumble back in the spring, but I think VNM has impressive prospects in the long run.
Singapore is the only nation in the region with “developed market” status. This island city-state off the tip of Malaysia is actually more advanced than parts of the U.S. and Europe. Some people say Singapore actually has the best quality of life in all of Asia. It’s certainly thriving economically, with some of the highest per-capita GDP and foreign exchange reserves on the globe.
iShares MSCI Singapore (NYSE:EWS) has a 12.5 percent five-year average annual return through the second quarter of this year. This easily beats just about every other developed market in the world. I think the outperformance will continue.
Some of the ETFs I’ve named today only came out in the last year or two, so their operating history is limited. They can also be illiquid and are subject to sharp moves (in both directions) when U.S. markets open for trading. So always use limit orders to help manage your risks.
Should you buy any of these ETFs today? The decision is yours, of course. I feel confident though that they will all deliver superior long-term results if bought selectively. Do a little research and I bet you’ll agree!
P.S. I’ll be discussing the emerging markets and other important ETF trends in the second annual Weiss Global Forum on August 17. Join me along with Martin Weiss, Mike Larson, Tony Sagami, Claus Vogt, and Rudy Martin for this exciting interactive event. Click here for your free registration.
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