How can I get exposure to Asian markets?
13 June 2024
Question by Boring Money Reader
To spread my investment, I’m looking for a similar fund to the S&P 500 that covers the Far East. What would you suggest? I preferably would like a Vanguard fund.
Answered by Holly Mackay
You want a low-cost passive fund that offers exposure to Asia. I’m not quite sure what the "Far East" means these days, so you will need to choose if that includes or excludes key markets like Japan or China.
I also think you need to bear in mind that the S&P 500 is less ‘risky’ than some of the emerging markets included in Asia. So investing in Vietnam, for example, will be a far cry from investing in the US’s biggest names.
On a final thought, there is a school of thought that says investing in passive funds makes a lot of sense in mature markets with tons of research and speedy, easily accessible information. In other words, where everyone knows the same as everyone else. In less developed markets, there is greater potential for an information advantage, and so if you look at Asia as a region, some would say that active management is worth considering.
With all this said and done, we asked finance expert Mark Dampier for his thoughts below.
The question is a bit difficult to answer with a like-for-like because the S&P 500 is a pure US index, while a Far East index would have to asset allocate a little, and select countries and make some decisions here. China is also the dominant country and generally as a stock market the returns have been awful - that said, right now it's near its lows.
MSCI AC Asia ex Japan (USD) might be one to try, but it has 31% of its portfolio allocated to China. There's also the FSSA Asia Focus fund if you prefer active management.
I would look for an investment trust too for other active opportunities but I don't have a strong favourite here.
Just to finally cover this off, we approached the PR team at Vanguard, and here's what they told us. Hope this helps!
For developed markets (Japan, Korea, Hong Kong, Singapore, etc), we have the Vanguard Pacific Ex-Japan Stock Index Fund (0.16%) and the Vanguard Japan Stock Index Fund (0.16%).
Japan is split out as otherwise it's 60% of the index and some investors prefer to include/exclude it depending on which countries they are looking for exposure to.
We also have, for ESG conscious investors, the below which does include Japan:
If you are looking for an Emerging Market exposure, then the Vanguard Emerging Market Stock Index Fund has exposure to the likes of China, India and Taiwan.
