5 Awesome Asia-Pacific ETFs to Consider for 2019

These Asia ETFs offer diversification and upside potential

By Todd Shriber, InvestorPlace Contributor

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Count Asia-Pacific ETFs among the international equity funds that are lagging this year. As of Monday, Nov. 26, the MSCI Pacific ex-Japan Index was lower by more than 9% year-to-date. Including Japan in the equation does not brighten the picture much as the MSCI Japan Index is also lower by about 9% this year.

On the upside, Asia ETFs, as is the case with many ex-U.S. funds, offer compelling value. Asia ETFs, including both developed and emerging markets fare, hold stocks that in many cases trade at steep discounts relative to major U.S. benchmarks.

While valuation alone is not a reason to buy a security, many Asia ETFs are backstopped by solid fundamentals, including companies developing disruptive technologies and many with solid balance sheets and other quality traits.

Here are some bright ideas among Asia ETFs to consider into year-end and for 2019.

iShares Asia/Pacific Dividend ETF (DVYA)

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Expense ratio: 0.49% per year, or $49 on a $10,000 investment.

Asia ETFs do not always have a dividend reputation comparable to some U.S. and Europe funds, but the Asia-Pacific region does feature some compelling income opportunities. The iShares Asia/Pacific Dividend ETF (NYSEARCA:DVYA) provides access to some of those opportunities.

When it comes to the Asia-Pacific region and dividends, Australia figures prominently in that equation. As such, the world’s 12th-largest economy is DVYA’s largest geographic weight at just over 48%. Thanks to the prominence of higher yielding real-estate stocks in the Hong Kong equity market, that market is 28% of DVYA’s weight.

By virtue of dividends still being a fairly new phenomenon through much of the region, this Asia ETF is a focused fund with just 30 holdings. Still, DVYA has at least two data points that are hard to ignore: a price-to-earnings ratio that is about half the S&P 500’s and a trailing 12-month dividend yield of just over 6%.

Vanguard FTSE Pacific ETF (VPL)

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Expense ratio: 0.10% per year, or $10 on a $10,000 investment.

As is the case with so many Vanguard funds, the Vanguard FTSE Pacific ETF (NYSEARCA:VPL) is one of the least expensive in its respective category. This Asia ETF’s annual fee of just 0.10% makes it cheaper than 92% of competing strategies, according to issuer data.

This Asia ETF also shares another trait in common with many Vanguard ETFs: a deep roster. VPL holds over 2,300 stocks, a surprisingly large amount when considering the fund’s geographic exposure is limited to six countries. Led by 60.40% weight to Japan, all of VPL’s geographic weights are developed markets. Index provider FTSE Russell classifies South Korea as a developed market, so Asia’s fourth-largest economy is VPL’s third-largest country weight.

With its large exposure to Japan and South Korea, this Asia ETF is somewhat levered to the consumer discretionary and technology sectors, but even with that trait, VPL is inexpensive relative to U.S. equity indices.

Invesco FTSE RAFI Asia Pacific ex-Japan ETF (PAF)

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Expense ratio: 0.49% per year, or $49 on a $10,000 investment.

As its name implies, the Invesco FTSE RAFI Asia Pacific ex-Japan ETF (NYSEARCA:PAF) is an Asia ETF that excludes Japanese stocks, a frequently used strategy by funds in this category. However, excluding Japanese stocks is not what makes this Asia ETF unique. Its weighting methodology does that.

PAF, which is eleven and a half years old, tracks the FTSE RAFI Developed Asia Pacific ex-Japan Index. That index selects components based on book value, cash flow, sales and dividends.

Home to nearly 200 stocks, PAF is dominated by Australian and South Korean stocks as those countries combine for over 74% of the fund’s weight. Overall 10 countries and 11 sectors are represented in this Asia ETF. Financial services and technology stocks combine for over 41% of PAF’s roster.

iShares Edge MSCI Min Vol Asia ex Japan ETF (AXJV)

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Expense ratio: 0.35% per year, or $35 on a $10,000 investment.

The iShares Edge MSCI Min Vol Asia ex Japan ETF (NYSEARCA:AXJV) is an Asia ETF to buy if you’re looking to avoid Japan exposure, reduce volatility, combine developed and emerging markets exposure or all of the above.

AXJV, which tracks the MSCI AC Asia ex Japan Minimum Volatility (USD) Index, is doing what a low volatility ETF is supposed to when markets decline: perform less poorly than traditional alternatives. Yes, this Asia ETF is down about 5.50% year-to-date, but that is actually impressive when considering the fund devotes 30.48% of its weight to beleaguered Chinese stocks.

While this Asia ETF has a low volatility strategy, it does allocate nearly a third of its combined weight to the technology and communication services sectors. Those two groups have recently been beaten up — with geography meaning little to investors.

O’Shares FTSE Asia Pacific Quality Dividend ETF (OASI)

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Expense ratio: 0.48% per year, or $48 on a $10,000 investment.

Another Asia ETF with a dividend, the O’Shares FTSE Asia Pacific Quality Dividend ETF (NYSEARCA:OASI) also offers some other favorable traits. OASI tracks the FTSE Developed Asia Pacific Qual/Vol/Yield 5% Capped Factor Index.

That index “is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the Asia Pacific region that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds,” according to O’Shares.

Likely due to the fund’s quality tilt, this Asia ETF allocates over 45% of its weight to Japan — by far its largest country weight. While Japan is historically a low dividend-yield country, it is home to some of the most cash-rich companies in the world, underscoring recently favorable dividend growth trends there.

OASI’s trailing 12-month yield of 2.92% implies room for dividend growth. This Asia ETF allocates about 36% of its combined weight to industrial and financial services stocks.

Todd Shriber does not own any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/11/5-awesome-asia-pacific-etfs-to-consider-for-2019/.

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