Get exposure to Asian shares with these 2 ETFs

The Asian share market could be a fruitful place to find businesses that are growing, driven by GDP growth.

| More on:
A woman looks internationally at a digital interface of the world.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • GDP and inflation in Asia is set to rise in the coming years, making the Asian economy a hotbed of opportunity for Aussie investors
  • One of the ways to get exposure to Asian shares is the Vanguard FTSE Asia Ex-Japan Shares Index which is invested in around 1,500 Asian businesses
  • Betashares Asia Technology Tigers ETF is another option. It's tech-focused with 50 positions, including Tencent and Alibaba

The Asian economy is huge and billions of people live there. So it stands to reason that businesses that succeed there can tap into the very large addressable market. We can gain access to that through Asian shares.

According to the Asian Development Bank, GDP in the Asian region will expand by 5.2% in 2022 and 5.3% in 2023 on continued recovery in domestic demand and solid exports. Inflation will rise to 3.7% in 2022 and 3.1% in 2023.

There are two different ways to try to get exposure to the Asian economy on the ASX. We can look at ASX shares that generate some profit from Asia, such as Blackmores Limited (ASX: BKL), A2 Milk Company Ltd (ASX: A2M) or Domino’s Pizza Enterprises Ltd. (ASX: DMP) as just a few examples.

However, we can also indirectly invest in Asian businesses through exchange-traded funds (ETFs) that own Asian shares, like the two outlined below.

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

This ETF is provided by Vanguard, one of the world’s largest asset managers that aims to provide investment funds at a cheap cost. The VAE ETF has an annual management fee of 0.40%.

It is invested in around 1,500 Asian shares that are listed in Asia, outside of Japan, Australia and New Zealand.

The following countries are represented in the portfolio: China, Taiwan, India, South Korea, Hong Kong, Singapore, Thailand, Indonesia, Malaysia and the Philippines.

While there are well over a thousand holdings in the ETF, there are some positions that have the biggest allocations because of their relative size: Taiwan Semiconductor Manufacturing, Samsung Electronics, Tencent, Alibaba, Reliance Industries, AIA Group, Meituan, Infosys, China Construction Bank and Hong Kong Exchanges & Clearing.

Has it done well? Looking at the five years of performance to April 2022, the net return was an average of 6% per annum, with 2.6% per annum of that coming from distributions.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

The ASIA ETF is a more specialised investment than the VAE ETF.

It’s about the 50 biggest Asian technology shares in Asia, outside of Japan. The tech sector can be a high-performing industry when there is a combination of revenue growth and high profit margins.

Some of the holdings include Tencent, Alibaba, Samsung, Taiwan Semiconductor Manufacturer, Meituan, Infosys, JD.com, Pinduoduo, Netease and SK Hynix.

Betashares says that “due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector.”

This ETF costs a bit more, with an annual management fee of 0.67%.

The country allocation is focused on three to four places – China (51.4% of the portfolio), Taiwan (22.2%), South Korea (18.7%) and India (7.2%).

Just like other technology investments, the ASIA ETF has seen declines this year. It’s down by more than 30% in 2022.

In the five years to May 2022, the index that Betashares Asia Technology Tigers ETF tracks has returned an average of 8.5% per annum.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended JD.com and Taiwan Semiconductor Manufacturing. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended NetEase. The Motley Fool Australia has recommended BetaShares Asia Technology Tigers ETF and JD.com. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

A woman holds up hands to compare two things with question marks above her hands.
ETFs

Why I prefer AFIC shares to an ASX 200 index fund today

Love ETFs? Here's an alternative that I think all investors should consider.

Read more »

A young man with short black fuzzy hair and wearing a black and white striped t-shirt looks surprised at a broker's tip that Macquarie shares will rise by 30%
ETFs

Expert names one of the best ETFs for ASX investors to buy now

Here's why this could be one of the best ETFs to buy right now...

Read more »

3 asx shares represented by investor holding up 3 fingers
ETFs

3 ETFs for ASX investors to buy right now

Here are three top ETFs to consider...

Read more »

A woman sits at her computer in deep contemplation with her hand to her chin and seriously considering information she is receiving from the screen of her laptop regarding the Xero share price
ETFs

Is the Vanguard MSCI International ETF (VGS) a good alternative to global tech shares?

Should investors think about the VGS ETF for its tech exposure?

Read more »

An accountant gleefully makes corrections and calculations on his abacus with a pile of papers next to him.
ETFs

Is the VAS ETF providing a bigger dividend yield than other ASX 200 index funds?

Does the VAS ETF come out on top when it comes to dividend income?

Read more »

ETF written in yellow with a yellow underline and the full word spelt out in white underneath.
ETFs

2 quality ETFs for ASX investors to buy next week

These ETFs are highly rated for a reason...

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
ETFs

3 things I love about the iShares S&P 500 ETF right now

Leading global tech exposure and low fees..what’s not to like about this ETF?

Read more »

a man sits in casual clothes in front of a computer amid graphic images of data superimposed on the image, as though he is engaged in IT or hacking activities.
ETFs

Here’s why I prefer NDQ to these other ASX tech ETFs today

Here's my pick when it comes to tech ETFs...

Read more »