The trade war between the US and China has been one of the biggest reasons why the global economy has not performed well during 2019.
But there’s talk that a trade deal between the US and China may soon be agreed. If that happens you can expect share markets across the world will get a boost. The ASX 200 (ASX: XJO) is already trading close to its all-time highs so I wouldn’t be surprised to see records broken.
The US economy has been going great so US shares are priced highly, but Asian shares haven’t been doing so well. That could all change if a trade deal is agreed.
One of the best ways on the ASX to get exposure to Asian shares is Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) which is an exchange-traded fund (ETF) invested across more than 1,200 Asian businesses.
The biggest holdings are exciting, fast-growth shares like Alibaba, Tencent and Ping An. But the ETF has decent exposures to several sectors, not just one or two, with 29.5% allocated to ‘financials’, 22% to ‘technology’, 11.6% to consumer services, 10.1% to consumer goods and 9.3% to industrials. For me, this is a more attractive industry mix than the ASX 200.
The Asian middle class and affluent class are rapidly growing their wealth and this will also help increase their spending. This will indirectly flow to the underlying Asian businesses which should lead to rising profit and dividends.
According to Vanguard, the ETF has a current earnings growth rate of almost 12 whilst the price/earnings ratio is 13.6x. It seems good value to me. I wouldn’t put a large amount of portfolio to this because of China risks, but it could be a mistake having no exposure at all – which is why it’s (a small part) in my portfolio.
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Motley Fool contributor Tristan Harrison owns shares of VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. 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.