Here is something that investors can take to their “to-big-too-fail” banks: Authorities in China will never allow a full-blown credit crisis to decimate the world’s 2nd largest economy. Disappointing manufacturing data, a falling yuan and the country’s first junk bond default have all contributed to perceived investing risks.
However, Chinese government officials have learned from the sub-prime disaster in the U.S. (2008) as well as the sovereign debt catastrophe in Europe (2011). They will provide stimulus as necessary.
I have been wrong about China turning a corner before. In early January commentary describing country ETFs that would benefit from capital shifting abroad, I gave the highest accolades to iShares MSCI New Zealand (ENZL), iShares MSCI Netherlands (EWN) and SPDR S&P China (GXC). Both ENZL and EWN performed admirably, while any exposure to China proved detrimental in the first quarter.
Keep in mind, corporate earnings in the U.S. are decelerating; spending cuts and share buybacks cannot prop up profits indefinitely. Meanwhile, China’s ability to stimulate its economy should provide the requisite stability for investors to consider countries that will benefit from the bottoming out of extreme China pessimism. In other words, you will probably need to broaden your horizons even if you choose not to invest in China directly.
Here are 3 Asian ETFs that should benefit from attractive fundamentals and increasingly improving technicals: