While trading in emerging market ETFs has been horrendous lately, much of the pain has been focused on the developing Asia-Pacific region. Securities in these markets have been crushed by a strong dollar, a sluggish China, and a general risk off trade.
However, while the damage in developing markets has been pretty extreme, investors should also note that industrialized countries have also seen huge losses in the past one month time frame. Markets like Japan are approaching double digit losses, while ETFs tracking countries like Singapore, Australia, and New Zealand have all lost more than 10% in just the past month alone.
While these countries are much more advanced than their peers in the Asia-Pacific zone, they are still prone to many of the same influences. These have seen currency weakness, a high dependence on China, and some profit taking, all of which have combined to produce the huge losses that have hit the market recently (see Developed Asia Pacific ETF Investing 101).
Although all funds in this corner of the world are currently in the red for the trailing one month time frame, a few have managed to hold up better than most. These nations generally either have a bigger dependency on the American market, or they haven’t been as bid up lately making them less attractive for profit taking opportunities.
In particular, South Korea and Taiwan have managed to hold up strongly in this type of environment. These two major exporters have avoided the worst blows that their peers in the region have suffered, and are potentially offering up compelling values at this time for investors seeking to make a play on the international market.
Below, we highlight funds tracking both Korea and Taiwan for those looking to cycle into the relatively strong performers in the Asia-Pacific region. These two could continue to outperform their peers if the current market environment continues, or they could make for an interesting pair trade with one of the weak markets if more fears hit the economy.
iShares MSCI Taiwan Index Fund (EWT)
EWT is by far the most popular ETF targeting the Taiwan market, tracking the MSCI Taiwan Index. The fund has roughly $2.7 billion in assets, while volume comes in at 5.2 million shares a day (also read Asia Ex-Japan ETF Investing 101).
In terms of holdings, the fund holds just over 100 stocks, with a big holding in Taiwan Semiconductor Manufacturing Company which accounts for 21% of the assets. Given this, it shouldn’t be too surprising to note that technology makes up over half the portfolio, followed by financials (16%) and basic materials (12%).
This ETF has declined by about 3.6% in the past month, a poor performance, but one that has beaten out others in the space by a wide margin. EWT is also still holding up quite well from a one year look, as it is up about 14.6% in the trailing one year time frame, a solid performance compared to others that have given back big gains lately.
iShares MSCI South Korea Capped ETF (EWY)
The most popular pick in the South Korean market also comes to us from iShares and their EWY. This fund tracks the MSCI South Korea 25/50 Index, and sees volume of about 2.1 million shares a day on assets of roughly $3.2 billion.
Once again, technology plays a very important role in this ETF, as Samsung makes up nearly 21.5% of the assets, easily making it the biggest individual holding. It is a bit more diversified from a sector look though, as tech makes up 31%, consumer discretionary accounts for 18%, and financials take up 15% of the product (read Korea ETF: Back on Track After Rate Cut?).
The fund has performed better than most in the region, losing about 2.9% in the last month. The ETF is still down significantly year-to-date though, but it has been holding up relatively well in recent trading.
Trading has been extremely rough in the Asia Pacific region over the last month or so. All funds in the area have succumbed to the trend, posting losses over the last one month time frame.
However, not all products are created equal and some have been able to withstand the blows better than others. EWY and EWT have been standouts in this respect, and could continue to be funds to watch in the region, should the current economic conditions continue.
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