Asian equities can form part of a strong growth portfolio and are a must consideration for investors who want access to the eastern growth story. Asia can be interesting and complicated, offering a wide range of both old and new companies and developed and emerging markets. Some of these ETFs exclude Japan given how well Japanese equities are covered by dedicated funds, and our selection focuses on offering income, growth from developed countries and growth from both emerging and developed countries. Last year’s category also included two ETFs focusing on China, but in 2018 both have been removed and a new Chinese equity ETF has been added to the emerging market category.
Dropped from 2017 selection
HSBC MSCI China UCITS ETF (HMCH)
This HSBC ETF remains one of the best and most efficient products for investors to track the Chinese H-Shares market – which encompasses mainland Chinese companies listed in Hong Kong. However, Hong Kong-listed Chinese companies are included in emerging market indices, which are included elsewhere, so the panel felt a specific H-share-focused ETF was not required.
iShares MSCI China A UCITS ETF (IASH)
Unlike the HSBC ETF, this iShares ETF tracks and invests in Chinese companies listed in Shanghai, known as A-Shares, and so provides very different exposure to what is available via Hong Kong. This ETF is very well priced, liquid and tracks its index well. However, the panel felt a better option was available from Xtrackers to invest in mainland Chinese companies, and this has been included in the emerging markets category.
New list
Vanguard FTSE Developed Asia ex Japan UCITS ETF (VAPX)
The Asian developed equity market is not rife with ETFs; however, this Vanguard product is well-priced, large, liquid and efficient at what it does, and the panel supported it keeping its place. It has amassed over £250m in assets and has an ongoing charge of only 0.22 per cent. However, it is worth noting that the index has high concentrations to certain regions, despite having more than 360 stocks. There is a 38 per cent allocation to Australia, with South Korea and Hong Kong accounting for 31 per cent and 22 per cent respectively.
NEW: HSBC MSCI All County Far East ex Japan UCITS ETF (HMAF)
This ETF was included as it provides a different exposure to the Vanguard product, covering both emerging and developed equity markets. It includes China and takes out Australia and New Zealand and provides more exposure to emerging companies in Taiwan. Over five years the MSCI AC Far East ex Japan index has outperformed the FTSE Developed Asia ex Japan index 75 per cent to 53 per cent. HMAF was chosen as we rate it the best product tracking the index, with a low bid/offer spread, good liquidity and an ongoing charge of 0.6 per cent. There is an iShares product that is bigger, with assets of £1.9bn compared with £216m in the HSBC ETF, but it’s more expensive, charging 0.74 per cent. The HSBC fund has returned more than the iShares fund over time and its liquidity is good enough for its smaller size not to matter.
SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF (PADV)
The panel supported keeping this income ETF in this year’s selection, given how well the methodology of picking stocks for the underlying index had worked. PADV only tracks stocks in the S&P Pan Asia Broad Market Index that have increased their dividends each year for seven consecutive years or more, giving exposure to more sustainable dividend payers. However, PADV is small relative to other ETFs included in this selection, and while its bid/offer spread is quite low, it is worth bearing this in mind. Nonetheless it remains the strongest choice for Asian equity income.
To view the IC Top 50 ETFs 2018 by category, please click on the links below:
Emerging market equities (four ETFs)
NEW: Sterling corporate bonds (two ETFs)
NEW: Global bonds (three ETFs)
Commodities and precious metals (three ETFs)
