Asian shares are known to be cheaper than large shares in the US on the ASX. But it’s very hard for us to get access to them.
It’s hard enough knowing what ASX shares to invest in, so picking Asian shares could be even tougher. But I think it could be a mistake to ignore them altogether.
I think these three investment ideas could be very cheap, good ways to invest into Asian shares:
PM Capital Asian Opportunities Fund Ltd (ASX: PAF)
This is a listed investment company (LIC) which invests into Asian shares, it aims to invest in around 15 to 35 quality Asian businesses.
Some of the businesses that it’s invested in include Heineken Malaysia, MGM China Holdings, Freeport-McMoRan Copper and Sinopec Kantons.
Asia has been a tough region to invest in because of the US – China trade war, so it has been a tough couple of years for the LIC.
However, the LIC is now trading at an attractive 11% discount to its pre-tax net assets and the underlying assets are supposedly cheap too. It also comes with a trailing grossed-up dividend yield of 5.4%.
Ellerston Asian Investments Ltd (ASX: EAI)
This is another LIC trading at a sizeable discount to its underlying assets. The trade war and Hong Kong protests have not been encouraging for Asian investors. The aim of this LIC is to focus on a relatively small group of large cap Asian shares which are growing at an attractive rate. Its biggest four holdings are: Tencent, TSMC, Samsung and Alibaba.
Over the past year its portfolio has delivered solid net returns of over 19%, outperforming the index by 5.7%. Despite that, the LIC is trading at a 12.4% discount to its net assets. This discount has closed a little compared to earlier in the year, but it still looks attractive.
Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)
I can understand if you don’t like the idea of investing in LICs because of their management fees. There is a lower-costing Vanguard exchange-traded fund (ETF) which invests in over a thousand Asian businesses for a management fee of just 0.4% per annum. The underlying index has a cheap price/earnings ratio.
It holds a weighting in the ETF in relation to the size of the businesses. So, it’s largest investments are businesses like Alibaba, Tencent, Taiwan Semiconductor and Samsung.
As the Asian region gets richer, the underlying shares should do well too. I hold the Vanguard ETF in my portfolio but I’m certainly willing to consider the LICs because of their attractive double digit discounts to their net assets. At the current prices I’d probably go for the Ellerston LIC – the discount is slightly bigger and the dividend is going upwards.