Two ETFs Ripe For Some Big Gains [iShares MSCI Philippines Investable, Global X Funds]

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August 4, 2014 1:54pm NYSE:ASEA NYSE:EPHE

gainsTony Sagami: Where’s Waldo? I have no idea, but I just landed in Manila to do some research, and I have my eye on a couple of Filipino stocks that look ripe for some big gains.


Why the Philippines? Most investors don’t even include this Southeast Asian nation on their radar screen.

That’s why I enjoy making these trips. I get to experience a new culture, see its economy in action, and talk to local experts and consumers. This gives me a solid idea about a country’s health and, in turn, the investments that can benefit from it.

The best part of my adventures is uncovering relatively inexpensive stocks with potentially big upside, and being able to share them with you in this column. And so today, I want to give you two ways you could profit from my most-recent trip …

Cheap + Growth = Home Run Potential!

While the pundits and Wall Street experts debate the state of the U.S. economy, the Philippines is growing like mad.

In 2013, its GDP grew by an impressive 7.2%, faster than all the BRICS countries outside of China.

The Philippines’ key asset is a well-educated, English-speaking workforce — making it the top destination to outsource business-processing functions such as call centers.

One of the issues for investors is that only ONE Philippine stock traded in the U.S., Philippines Long Distance Telephone (PHI).

However, there is an ETF, the iShares MSCI Philippines (NYSEARCA:EPHE), worth your consideration.

The top holdings include several stocks that trade on the U.S. Over The Counter Market, including Ayala Land (AYAAF), Universal Robina (UVRBY), BDO Unibank (BDOUF), SM Investments (SVTMF, JG Summit Holdings (JGSMY), Ayala Corporation (AYALY), Aboitiz Equity Ventures (ABTZY), SM Prime Holdings (SPHXF), and Jollibee Foods (JBFCY) — aka, the McDonald’s of the Philippines.

Philippines Long Distance Telephone is also in this ETF’s mix.

Another Way to Cash in on Southeast Asia’s Growth

If you want a little more diversification, you could also consider the Global X FTSE ASEAN 40 ETF (NYSEARCA:ASEA), an ETF that targets the ASEAN members, including the Philippines.

Not too many American investors have heard of ASEAN, but let me tell you, I think it represents a powder keg of opportunity.

ASEAN stands for the Association of Southeast Asian Nations; a geopolitical and economic organization of 10 countries located in Southeast Asia. They are working together to cross-promote each other’s economic and humanitarian growth.

ASEAN Nations

The organization formed in 1967, when the leaders of five countries — Indonesia, Malaysia, Philippines, Singapore and Thailand — joined forces in an effort to promote economic coordination and regional free trade.

The membership base has changed over the year, adding Brunei, Burma/Myanmar, Cambodia, Laos and Vietnam.

With a population of almost 600 million people, the ASEAN region has an economy bigger than India. Plus, it has aggregate stock market capitalization of $2 billion, making it larger than both India and Brazil.

The ASEAN region is thriving thanks to low labor costs, rich natural resources, strong relationships with China, and a wave of economic liberalizations that have encouraged foreign investment.

The ASEA ETF aims to replicate the performance of the FTSE/ASEAN 40 Index, which is made up of the 40 largest companies in the original five ASEAN countries: Indonesia, Malaysia, Philippines, Singapore and Thailand.

This ETF currently has zero exposure to Brunei, Burma/Myanmar, Cambodia, Laos and Vietnam. But those markets are underdeveloped, shallow and extremely volatile, as well as difficult for U.S. investors to buy in.

ASEA is heavily weighted with financial services and banks with 40% assets, followed by telecom (16%), industrials (15%), and consumer discretionary (11%) stocks.

The largest individual holdings include DBS Group Holdings, Singapore Telecommunications and Oversea-Chinese Banking.

Now, I am not suggesting that you rush out and buy any of the above securities this morning. As always, timing is everything so I recommend that you wait for my buy signal before jumping in.

However, the Philippines and its ASEAN neighbors are some of the most vibrant economies in the world, and this region deserves some of your investment attention.

Tony SagamiThis article is brought to you courtesy of Tony Sagami

Money and Markets is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Money and Markets or its editors.


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