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Emerging Asia ETFs Look Like a Cheap Bargain Play for 2019

This article was originally published on ETFTrends.com.

Asian markets were among the worst off in 2018 as trade tensions, U.S. interest rate hikes and China's deleveraging policies sent investors running. However, now that the dust is settling, investors may find a cheap opportunity in emerging Asian markets and related exchange traded funds.

Asia's share valuations compared to forecast earnings are at their lowest levels in five years, trading at 12 times expected earnings for the next 12 months, whereas the U.S. markets are trading at about 15.5 times or in line with their 10-year average, the Wall Street Journal reports.

Furthermore, when accounting for free cash flow, Asian stocks show even better value, trading at their cheapest levels in over a decade or hovering below the lowest levels last experienced during the financial crisis.

Meanwhile, as China attempts to bolster its economy through stimulus measures, the Federal Reserves looks to moderate its monetary tightening and the U.S. shows signs of progress in trade negotiations, some market observers and investors are growing more optimistic about the emerging Asia outlook.

Looking beyond the short-term noise, fundamentals remain strong. Herald van der Linde, head of Asia-Pacific equity strategy at HSBC, argued that Asian companies are still delivering high-quality earnings growth. “Margins are expanding in China, and indeed in large parts of the rest of the region,” he said in a note, adding that estimates are for Asian earnings per share to rise by 8% this year.

For those who are interested in gaining exposure to these emerging Asian markets, ETF investors can look to country-specific ETFs, such as the iShares MSCI Malaysia ETF (EWM) , iShares MSCI Philippines ETF (EPHE) , iShares MSCI Indonesia ETF (EIDO) and VanEck Vectors Indonesia Index ETF (IDX) .

The SPDR S&P China ETF (GXC) , the iShares China Large-Cap ETF (FXI) and Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) also provide exposure to China, the second largest economy in the world.

Investors can also take on broad exposure to these emerging Asian economies through region-themed ETFs. For instance, the SPDR S&P Emerging Asia Pacific ETF (GMF) provides broad exposure to emerging economies in the Asian Pacific, including China, Taiwan, India, Thailand, Malaysia, Indonesia and Philippines. The iShares MSCI All Country Asia ex Japan ETF (AAXJ) , which excludes Japanese and Australian stock exposure and tilts toward more emerging economies, including China, Korea, Taiwan, Hong Kong, India, Singapore, Malaysia, Thailand, Indonesia and Philippines.

For more information on Asian markets, visit our Asia category.

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