ADB Expects Asia to Remain Strong: 3 Fund Picks
The most-recent report released by the Asian Development Bank (ADB) on Jul 21, states that growth in Asia would remain steady despite the prevalence of the global trade war. This can primarily be attributed to judicious policymaking practices followed in some of the large Asian economies.
Such policies not only ensure sustainable growth within the economy but also safeguard it from any global shock. Under circumstances where the Asian economy is likely to remain strong, investing in mutual funds from the region seems prudent.
Asia’s Growth to Remain Steady Despite Trade War
In its latest report, the ADB projected that Asia’s economy is set to grow 6% in 2018 and 5.9% in 2019. This is largely in line with its previous forecast in April. Further, if Asia’s newly industrialized economies are excluded, the growth forecast stands at 6.5% for 2018 and 6.4% for 2019.
ADB Chief Economist, Yasuyuki Sawada believes that judicious macroeconomic and monetary policies would not only result in robust economic growth in the region but also cushion the economy from “external shocks.” This is evident from the fact that China, the world’s second-largest economy, is poised to grow 6.6% and 6.4% in 2018 and 2019, respectively. The projection stems from the fact that the Chinese government has consistently made efforts toward rebalancing the growth by shifting focus toward increasing domestic consumption.
Further, East Asia would witness 6% growth in 2018 and 5.8% in 2019, on the back of steadily growing economies of Hong Kong, China and Taipei. On the other hand, growth in South Asia would be the fastest in the region.
The region’s growth would be led by India, which is on track to meet its fiscal year 2018 projection of 7.3% growth. This would further accelerate to 7.6% in 2019 buoyed by reformations in taxes as well as the country’s banking sector. Finally, growth in Southeast Asia would remain unchanged at 5.2% in 2018 and 2019.
3 Best Funds to Buy Now
Given such circumstances, we have highlighted four mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
T. Rowe Price New Asia PRASX invests a bulk of its assets in common stocks of Asian companies ex Japanese companies. PRASX seeks appreciation of capital for the long run. The fund is non-diversified in nature.
This Sector - Pacific Rim-Equity product has a history of positive total returns for over 10 years. Specifically, the fund has returned 7.9% over the three-year and 8.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PRASXhas a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.93%, which is below the category average of 1.40%.
Matthews Asia Growth Investor MPACX seeks to achieve its investment objective by investing the majority of its assets in preferred and common stocks of companies located in Asia. It may also invest in convertible securities of Asian companies. MPACX seeks capital growth for the long run.
This Sector - Pacific Rim-Equity product has a history of positive total returns for over 10 years. Specifically, the fund has returned 11.5% over the three-year and 9.5 over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
MPACXcarries a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.12%, which is below the category average of 1.26%.
Fidelity China Region FHKCX invests the majority of its assets in securities of Hong Kong, Taiwan and China issuers and other investments that are tied economically to the China region. It invests primarily in common stocks.
This Sector – China-Equity product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 4.6% and 11.4%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FHKCX has a Zacks Rank #2 and an annual expense ratio of 0.99%, which is below the category average of 1.68%.
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