The Motley Fool

2 ETFs to buy for the trade war truce bounce

The trade war between the US and China has been a real drag on share markets.

But it seems as though the trade war could be on a better path with the two countries agreeing to resume trade talks. Indeed, United States President Donald Trump said “We’re right back on track.”

That’s why I think certain exchange-traded funds (ETFs) could be good choices if the talks result in an agreement being formed. This is in President Trump’s interests because he has an election to win next year.

These ETFs are two ideas to think about:

Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)

One of the main beneficiaries of a solution to the trade war would be the shares of Chinese businesses which have suffered in reaction to the ongoing trade dispute. China is a huge exporter, so a lot of its economy is dependent on supportive global trade.

Around a third of this ETF is allocated to Chinese businesses with an additional 25% allocated to Hong Kong and Taiwan.

I think Asia is worth watching for investment opportunities this century as there is plenty of growth left until China and India match similar economic levels per person and the quality of national infrastructure of western countries. The ETF’s holdings collectively are generating 10% earnings growth, yet the ETF is only priced with a p/e ratio of 12.6x.

In my opinion, it might be unwise to completely ignore Asian giants like Tencent, Samsung, Alibaba and so on.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

More broadly, I think the entire global share market could receive a bounce if the trade war truly comes to an end.

The world is so interconnected that what happens between China and the US affects every part of the global economy.

The Vanguard MSCI Index International Shares ETF is invested across every major share market, it has over 1,600 holdings across the US, Japan, the UK, France, Canada, Switzerland, Germany, Hong Kong, the Netherlands, Spain and so on.

If I could only own one ETF for the rest of my life, this would be one of my top choices.

Foolish takeaway

Both of these ETFs have attractive long-term growth outlooks, good diversification, a technology slant and cheap annual management fees. If I could only buy one of the two today it would the Vanguard Asian ETF because of the cheaper valuation and stronger growth prospects.

However, both of these ETFs have low dividend yields, so it could be a good strategy to combine them in a portfolio with these leading ASX shares which also have good growth potential.

3 High-Quality ASX Shares To Consider For Your Portfolio This Year

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!


Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.