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Why I’m close to hitting the buy button on UBS IQ Asia ETF (ASX:UBP)

There is almost a weekly supply of incredible news coming out of the US, mainly relating to President Trump. Whilst most of the goings on are thankfully internal matters, there is the occasional decision that can have global ramifications.

The Trump Administration is reportedly close to adding yet another huge raft of tariffs on Chinese goods.

This type of move is not only bad for diplomatic relations but it can send tremors through share markets. Whilst I doubt many of Trump’s decisions will last long into the next Democrat term, it could cause damage in the short-term.

Many of the listed Chinese businesses generate most of their earnings from the domestic China economy. Tariffs don’t necessarily directly affect them. That’s why I’m very interested in putting some money towards UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP).

This exchange-traded fund (ETF) gives investors exposure to 50 of the largest listed Asian businesses outside of Japan. Most of the businesses are based in either China or Hong Kong.

Some of its top holdings include Tencent, Alibaba, Samsung, Taiwan Semiconductor and Baidu. A good portion of this index is technology based. Asia is only going to become more technological as time goes on and wealth grows.

Quite a lot of the rest of the holdings relate to financial shares like banks and insurance. As the Chinese population becomes wealthier there will be greater demand for financial products, like we have seen in western economies.

There are of course major risks. It could hurt China to be in a trade war with the USA. There is supposedly a huge debt problem in China that could go wrong. Economic growth could slow. There is a large China-specific risk, particularly government and ownership risk, relating to these Chinese listed businesses.

Foolish takeaway

This ETF would definitely be in the category of high risk, high reward. China is going through a once-in-a-lifetime economic boom that is propelling it towards the rank of number one global economy. However, China does not operate with the exact some economic rulebook as Australia and the US.

I am looking to take advantage of this short-term fear to accumulate an investment in this UBS Asian ETF, however it could be volatile during Trump’s presidency. But, I would want this ETF to remain a single digit weighting of my portfolio.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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