Is the BetaShares Asia Technology Tigers ETF (ASX: ASIA) a good long-term ASX investment?
Asian countries, in particular China, are home to some of the world's best tech companies outside the United States. Just last week, we heard that one of them, Tencent Holdings, has bought into ASX favourite Afterpay Ltd (ASX: APT).
Asia is home to the most populous countries on Earth such as China, India and South Korea – and as such, has many vast opportunities for growth. But (unlike buying US shares), it can be exceedingly difficult for ASX investors to get a slice of this pie by directly buying shares of companies that are based in Asia.
Fortunately, the Asia Technology Tigers ETF solves this problem. It's an exchange-traded fund (ETF) that holds "the 50 largest technology and online retail stocks in Asia (ex-Japan)".
Its largest holdings are in Tencent, as well as Alibaba (called the eBay of China), Samsung, JD.com (the Amazon of China), Baidu (the Google of China) and iQiyi (the Netflix of China). These companies dominate the Asian eCommerce scene. Alibaba and Tencent both own some of the most popular apps in China (such as WeChat and Alipay), which in addition to allowing online shopping, also function as messenger and payment services.
You just can't get access to these kinds of markets through other companies, even the US giants like Amazon, due to the restrictive policies of the Chinese government.
How does ASIA work?
But let's look at the ETF in detail to see whether this ETF is a good proxy. So ASIA charges a management fee of 0.67% per annum, which is on the expensive side for an ETF in my view. However, this can be somewhat justified by the unique exposure it offers.
Since its launch in 2018, ASIA has returned an average of 14.17% per annum, including 22.71% over the past year. This compares very favourably with the S&P/ASX 200 Index (ASX: XJO), which has returned -9.06% over the same period.
This is definitely an ETF designed for the growth investor and carries with it many risks. Chinese companies are notoriously intransparent when it comes to their books, which is concerning for many outside investors.
In addition, many of these companies (such as Alibaba and JD.com) operate through external holding companies known as VIEs (variable interest entities) – which operate in a grey area of Chinese commercial law. Thus, there is also some political risk here.
Foolish takeaway
I think this Technology Tigers ETF would make a great addition to a growth investor's portfolio – especially one that demands greater diversification and increased exposure to some of the best companies in Asia. There are risks here, but I think these can be managed by choosing an appropriate portfolio allocation for this ETF.
