Reviewing the performance of Asia Pacific focused ETFs

The Asia Pacific region is one of the largest in the world, by both population and economic size. The region is home to 60% of the world’s population and makes up about 37% of global GDP. And even after decades of rapid growth and the birth of some of the world’s most innovative companies, the future of the region still looks bright. For those looking to invest in the region today, what options are available? While some investors prefer to invest in individual companies, this article will focus on ETFs. The ETFs that cover the region can be broken down into three categories:

• Country focused ETFs: These are ETFs that track an index consisting of some of the largest companies in a specific country. For example, EWJ (the iShares MSCI Japan ETF) tracks the MSCI Japan Index, which consists of large and mid cap sized companies. Investing in this type of ETF gives you exposure to a specific country’s stock market, similar to how SPY and VOO give investors exposure to the largest publicly traded companies in the United States.
• Regional focused ETFs: These are ETFs that track specific types of companies throughout the Asia Pacific region. For example, VPL (Vanguard FTSE Pacific ETF) tracks an index of companies located in the developed markets of the region. Investors buying these ETFs will get broader exposure to the region than Country focused ETFs.
• Sector or niche specific ETFs: These are ETFs that track a specific sector or niche within the region. For example, KWEB (KraneShares CSI China Internet ETF) tracks an index composed of some of the largest Chinese tech companies. This type of ETF is ideal for an investor who has a very focused thesis on specific types of companies or sectors in the region.

Let’s review five notable ETFs in each of these three categories, sorted by their Assets Under Management (AUM). First, lets look at the Country focused ETFs:

MCHI (iShares MSCI China ETF) tracks an index of Chinese stocks that are available to investors outside the country. Here are some key metrics:

• The fund has $8.56 billion in AUM
• The three largest holdings are Tencent Holdings, Alibaba Group Holding and Meituan
• 1 Year Total Return: -15.4%
• 3 Year Total Return: -20.3%
• 5 Year Total Return: -27.0%

INDA (iShares MSCI India ETF) tracks an index of large and mid-sized Indian companies. Here are some key metrics:

• The fund has $4.51 billion in AUM
• The three largest holdings are Reliance Industries, Infosys and Housing Development Finance Corp (HDFC)
• 1 Year Total Return: -10.1%
• 3 Year Total Return: 21.0%
• 5 Year Total Return: 21.5%

EWY (iShares MSCI South Korea ETF) tracks an index of large and mid-sized Korean companies. Here are some key metrics:

• The fund has $3.86 billion in AUM
• The three largest holdings are Samsung Electronics Co, SK Hynix and Samsung SDI Co
• 1 Year Total Return: -14.7%
• 3 Year Total Return: 8.0%
• 5 Year Total Return: -12.1%

EWA (iShares MSCI Australia ETF) tracks an index of large and mid-sized Australian companies. Here are some key metrics:

• The fund has $2.24 billion in AUM
• The three largest holdings are BHP Group, Commonwealth Bank of Australia and CSL Ltd
• 1 Year Total Return: 2.4%
• 3 Year Total Return: 16.1%
• 5 Year Total Return: 25.4%

Next, lets look at the Regional focused ETFs:

VPL (Vanguard FTSE Pacific ETF), referenced earlier, tracks an index of companies in the developed markets of the region. These markets are Japan, Australia, Hong Kong, New Zealand, and Singapore. Here are some key metrics:

• The fund has $6.04 billion in AUM
• The three largest holdings are Samsung Electronics Co, Toyota Motor Corp and BHP Group
• 1 Year Total Return: -6.9%
• 3 Year Total Return: 8.3%
• 5 Year Total Return: 3.0%

AAXJ (iShares MSCI All Country Asia ex Japan ETF) tracks an index of 10 markets in the region, and excludes Japan. The ten markets are: China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand. Here are some key metrics:

• The fund has $3.08 billion in AUM
• The three largest holdings are Taiwan Semiconductor Manufacturing Co (TSMC), Tencent Holdings and Samsung Electronics Co
• 1 Year Total Return: -13.9%
• 3 Year Total Return: -1.4%
• 5 Year Total Return: -7.3%

AIA (iShares Asia 50 ETF) tracks an index of 50 of the largest stocks in the region. The fund consists of many names that are recognized by investors around the world. Here are some key metrics:

• The fund has $1.52 billion in AUM
• The three largest holdings are Taiwan Semiconductor Manufacturing Co (TSMC), Tencent Holdings and Samsung Electronics Co
• 1 Year Total Return: -16.3%
• 3 Year Total Return: -2.2%
• 5 Year Total Return: -4.6%

GMF (SPDR S&P Emerging Asia Pacific ETF) tracks the S&P Emerging Asia Pacific BMI Index which consists of stocks in the emerging markets of the region. Here are some key metrics:

• The fund has $362.8 million in AUM
• The three largest holdings are Taiwan Semiconductor Manufacturing Co (TSMC), Tencent Holdings and Alibaba Group
• 1 Year Total Return: -12.4%
• 3 Year Total Return: 4.7%
• 5 Year Total Return: 0.6%

ASEA (Global X FTSE Southeast Asia ETF) tracks the FTSE/ASEAN 40 Index, which consists of companies in the ASEAN region (specifically Singapore, Malaysia, Indonesia, Thailand and the Philippines. Here are some key metrics:

• The fund has $46.0 million in AUM
• The three largest holdings are DBS Group Holdings, Oversea-Chinese Banking Corp and PT Bank Central Asia Tbk
• 1 Year Total Return: -3.1%
• 3 Year Total Return: 9.7%
• 5 Year Total Return: -5.1%

Finally, lets review the Specific sector or niche focused ETFs:

KWEB (KraneShares CSI China Internet ETF), referenced earlier, consists of some of the largest Chinese tech firms. Here are some key metrics:

• The fund has $6.49 billion in AUM
• The three largest holdings are Tencent Holdings, Alibaba Group Holding and Meituan
• 1 Year Total Return: -10.7%
• 3 Year Total Return: -36.7%
• 5 Year Total Return: -49.6%

CXSE (WisdomTree China ex-State-Owned Enterprises ETF) consists of Chinese companies that are not state owned. The ETF issuer, WisdomTree, considers a state owned enterprise one where the government owns at least 20% of the company. Here are some key metrics:

• The fund has $798.8 million in AUM
• The three largest holdings are Alibaba Group Holding, Ping An Insurance (Group) Co. of China and Meituan
• 1 Year Total Return: -20.9%
• 3 Year Total Return: -15.9%
• 5 Year Total Return: -19.3%

CHIQ (Global X MSCI China Consumer Discretionary ETF) tracks large and medium sized Chinese companies in the consumer discretionary space. The index provider, MSCI, defines which companies qualify, and you will notice some companies which are notable ecommerce giants are part of the index. Here are some key metrics:

• The fund has $359.4 million in AUM
• The three largest holdings are Alibaba Group Holding, PDD Holdings and Meituan
• 1 Year Total Return: -10.6%
• 3 Year Total Return: 9.2%
• 5 Year Total Return: 7.9%

SMIN (iShares MSCI India Small-Cap ETF) tracks an index of small cap Indian companies. Unlike INDA, the ETF which tracks the largest Indian companies, the companies in this index will be unknown to most investors outside of India. Here are some key metrics:

• The fund has $272.7 million in AUM
• The three largest holdings are Max Healthcare Institute Ltd, Persistent Systems Ltd and Ashok Leyland Ltd
• 1 Year Total Return: -7.6%
• 3 Year Total Return: 37.1%
• 5 Year Total Return: 8.1%

DFJ (WisdomTree Japan SmallCap Dividend ETF) tracks, as the name suggests, an index of small cap Japanese companies that pay dividends. Similar to how SMIN gives investors the ability to reach Indian companies not well known outside the country, DFJ does the same for Japan. The ETFs focus on dividend producing companies is also notable. The current yield on this ETF is currently 2.57%, compared to 1.20% for EWJ (which tracks the largest Japanese companies) Here are some key metrics:

• The fund has $178.9 million in AUM
• The three largest holdings are Kobe Steel Ltd, Cosmo Energy Holdings Co Ltd and Seven Bank Ltd
• 1 Year Total Return: -3.6%
• 3 Year Total Return: 5.6%
• 5 Year Total Return: -11.4%

So which ETFs have performed the best and worst over the periods reviewed?

• In the last year, the best performing Asia Pacific focused ETF was EWA (iShares MSCI Australia ETF), which has a return of 2.4%. The worst performing ETF was CXSE (WisdomTree China ex-State-Owned Enterprises ETF), which had a return of -20.9.%
• In the last 3 years, the best performing Asia Pacific focused ETF was SMIN (iShares MSCI India Small-Cap ETF), which returned 37.1%. The worst performing ETF was KWEB (KraneShares CSI China Internet ETF), which returned -36.7%.
• In the last 5 years, the best performing Asia Pacific focused ETF was EWA (iShares MSCI Australia ETF), which returned 25.4%. The worst performing ETF was KWEB (KraneShares CSI China Internet ETF), which returned -49.6%.

In summary, Australian and Indian focused ETFs have performed among the best in the region, while Chinese focused ETFs have performed among the worst.