Shifting Equity Exposure To Asia

Photo Courtesy of WhatKnot.Com via Flickr and CreativeCommons

As the Dow Hits New Highs and the Economy Slows I Look For Ways to Shift Holdings to Asia. 

There is building pressure for a rally in Asian currencies. 
1. The dollar has been gaining recently relative to the Yen.
2. The Chinese Yuan is still pegged to the dollar at an artificially low valuation.
3. At some point Asians are going to get sick of holding US Govt. IOU's.
4. Asian economies look to remain strong relative to the U.S. as they diversify trading partners away from the U.S.

The shares of Asian companies will continue to do well with or without the US economy and a strong dollar. There are two scenarios both of which favor Asian companies over the US ones for a US Dollar Investor.
1. Dollar remains strong relative to Asian Currencies: Asian companies continue to export
2. Dollar weakens: Dollar value of Asian Stocks do very well.   While exports may decline a bit, inter-Asian trade is now picking up huge and the companies will benefit from local economic growth (not just exports).

How am I playing this?  I like the Vanguard Pacific ETF (VPL) for its very low expense ratio of only 0.15% and its high weighting toward Japan.  I also like Wisdom Tree ETFs -  WisdomTree Pacific ex-Japan Total Dividend Fund (DND) and WisdomTree Japan Total Dividend Fund (DXJ).  At  0.48%, they have higher expense ratios than Vanguard but still less than the more liquid Barclays iShares country specific funds like Ishares Japan (EWJ), iShares Singapore (EWS),  and iShares Hong Kong (EWH) at nearly 0.59%.

Disclosures and confessions:  I own VPL.  I do not own but have traded EWS in the last two-years. From 1996 to 2002 I was global head of portfolio trading which included responsibility for ETF market making at Morgan Stanley.  I currently have no connection to any other organization amed above.

Disclaimer:  Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell.  I do not give investment advice.  Do your own research.  Do not rely on anything in this weblog to make investment decisions.  I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security