Consumer spending and infrastructure to boost ASEAN ETFs

Jan 9th, 2013 | By | Category: Equities

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Emerging ASEAN (Association of Southeast Asian Nations) markets such as the Philippines, Indonesia and Thailand continue to offer good opportunities for investors looking for fast-growing economies with robust fundamentals.

Consumer spending and infrastructure investment to boost ASEAN ETFs

The Philippines has performed very strongly owing to growing domestic confidence and much improved macro fundamentals.

Significant growth in the number and wealth of middle-class consumers, combined with an expected acceleration in infrastructure spending, helps builds a compelling, multi-year case for investing in ASEAN equity markets.

This is a view shared by Soo-Hai Lim, Investment Director for Asia Pacific equities at Baring Asset Management and manager of the Barings ASEAN Frontiers Fund, a mutual fund.

He says: “Sustained and superior economic growth is being driven by domestic demand from a growing number of consumers. ASEAN economies have successfully restructured and deleveraged since the 1997 Asian financial crisis and are firmly on the investor radar including, significantly, Foreign Direct Investors who are allocating resources and capital. This in turn is creating jobs, resulting in a re-rating of property prices in both industrial and residential sectors.”

He continues: “While Indonesia continues to be the ‘poster child’ for ASEAN economies, and has overtaken its pre-Asian-crisis market highs in USD terms, the Philippines has also performed very strongly thanks to growing domestic confidence, and much improved macroeconomic fundamentals – the Philippines is the best performing ASEAN market and the Philippine peso is the best performing Asian currency to date. Thailand is also looking buoyant, with the second highest return on equity in the region.”

While the world has been focused on the European debt crisis and other major investment challenges over the past four years, ASEAN economies have been steadily growing and delivering strong returns.

The GDP of the ASEAN nations as a percentage of global GDP now stands at 3.1% – having risen at its steepest rate since the Asian crisis over the past four years – illustrating how significant the bloc has become on the world stage. Critically, though, the weighting of ASEAN countries in the MSCI AC World Index is still at just 1.9%. This under-representation versus their GDP weight underlines the growth potential in the region and the opportunity available to investors.

For investors looking to access emerging ASEAN markets, exchange-traded funds (ETFs) provide an effective means of achieving liquid, targeted exposure at low cost.  There are a range of ETFs available, offering both regional and country-specific exposure. The ETFs highlighted below are all listed on the London Stock Exchange (except where stated), although most have multiple cross-listings on other European exchanges such as Xetra, Euronext, Borsa Italiana and SIX Swiss.

The following funds track the MSCI Indonesia, MSCI Malaysia, MSCI Philippines and MSCI Thailand indices respectively. Weighted by free-float-adjusted market capitalisation, these indices are designed to reflect the performance of a country’s  equity market by targeting all companies with a market capitalisation within the top 85% of the investable equity universe.

HSBC MSCI Indonesia ETF (HIDR) TER 0.60%
db X-trackers MSCI Indonesia TRN Index ETF (XMID) TER 0.65%

db X-trackers MSCI Malaysia TRN Index ETF (XSX3)
 TER 0.50%
HSBC MSCI Malaysia ETF (HMYR) TER 0.60%

db X-trackers MSCI Philippines TRN Index ETF (XPHG) TER 0.50%

db X-trackers MSCI Thailand TRN Index ETF (XCX4) TER 0.50%

The following fund is based on the FTSE Vietnam Index. This index provides broad coverage of stocks traded on the Ho Chi Minh Stock Exchange and is comprised those companies of the FTSE Vietnam All-Share Index that have sufficient foreign ownership availability.

db X-trackers FTSE Vietnam Index ETF (XFVT) TER 0.85%

The following fund tracks the FTSE ASEAN 40 Index. This index tracks the performance of the 40 largest companies, weighted by market capitalisation, from ASEAN’s more developed financial markets, namely Indonesia, Philippines, Singapore, Malaysia and Thailand.

Global X FTSE ASEAN 40 ETF (ASEA) TER 0.65% (NYSE listed)

The following four funds track the MSCI Emerging Markets Asia Index (MSCI EM Asia) and offer broader exposure to the wider Asia region (i.e. outside of ASEAN). The MSCI EM Asia is a free float-adjusted market capitalisation index reflecting the performance of the equity markets of Asian emerging market countries. The index is consisted of constituents out of the following 9 countries: China, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Taiwan and Thailand.

Amundi ETF MSCI EM Asia (AASI) TER 0.45%
DB X-trackers MSCI EM Asia TRN Index ETF (XMAS) 
TER 0.65%
SPDR MSCI EM Asia ETF (EMAS) 
TER 0.65%
Credit Suisse ETF (IE) on MSCI EM Asia (CEA1) 
TER 0.65%

The following fund tracks the MSCI Emerging Market Far East Index. The MSCI EM Far East is a market-capitalisation weighted index designed to measure the performance of the largest companies in China (as accessible through the Hong Kong market), Indonesia, Korea, Malaysia, Philippines, Taiwan and Thailand.

HSBC MSCI EM Far East ETF (HMFE) TER 0.60%

The following fund tracks the market-capitalisation-weighted DAXglobal Asia Index. This index replicates the performance of the 40 largest stocks from emerging East Asia. Constituents are from the following countries: China (inc HK), India, South Korea, Taiwan, Indonesia, Thailand, Malaysia, Singapore and the Philippines. The maximum number of companies per country is limited to 12.

RBS Market Access DAXglobal Asia Index ETF (M9SF) TER 0.65% (Xetra-listed, registered in UK)

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