When Julia Gillard delivered the government’s Asian Century Whitepaper last week, she just confirmed what most of us already knew – Asia is an economic powerhouse that we need to tie our economic fortunes to.
And that’s not just at the top end corporate and government level, but right down through every tier of the economy, including personal finances. Even through to musical integration if you’re a fan of South Korean pop sensation Psy’s ‘Gangnam Style’ hit.
You see Asia has an enormous young, hard working population that’s driving rapid growth right across the region. It boasts a keenly competitive manufacturing sector that clocks up enormous trade surpluses and an emerging middle class that will see it takeover as the global economic epicentre.
And guess what, we live within a good boomerang throw of it all. But being close isn’t enough, everyday Aussies can be looking to get exposure to this economic evolution via the ease of open financial markets.
Be aware that directly buying property and business interests are still tricky procedures in a lot of countries across Asia. Despite rapid economic development, it’s not yet as open to foreign investment as western economies are.
There are still significant legal limitations in place to protect national interests, as well as dysfunctional governments, corruption, poverty and volatility in a lot of Asian countries too. But that’s not to say investing in Asia is a necessarily difficult task.
In fact, it can be as easy as buying shares on the ASX.
There are a range of Exchange Traded Funds (ETFs) listed on the local share market that track the price and dividend performance of various Asian stocks and exchanges. The biggest range of these are iShares, put together by investment house Blackrock.
These ETFs trade on the ASX and are effectively a basket of Asian stocks that you can buy a share in. It’s the cheapest and easiest way an individual investor can get a well diversified range of listed companies operating in Asia.
For example, there is the Asia 50 Index Fund which is a collection of shares in the biggest companies operating across the region. Or the China 25 Index Fund that tracks the performance of exactly that, the 25 largest and most liquid Chinese listed companies.
There’s a South Korean focused fund and a Taiwanese one too, a fund just for Hong Kong, Japan and one for Singapore.
You can buy and sell shares in these funds just as you would any other listed company.
For their troubles the fund managers take a management fee of 0.5% per annum, much less than it would cost you to replicate the investment yourself.
Of course there are additional currency and liquidity risks inherent to these investments that need to be considered.
But it’s not enough to just know the product you’re trading, you need to get familiar with the region you plan to invest in. Think about it, you wouldn’t buy a bike without first knowing the terrain it’ll be ridden on.
To this end it’s important to understand the culture, history and economy, as well as the particular investment you’re looking to put your money into.
I’ve always thought the greatest insight you can get into an economy and culture comes from the trip from the airport to the hotel. You instantly experience the infrastructure, see the working environment, gauge pollution, the presence of police and manner of people.
But short of jetting into Asia for a look, there is plenty to learn from online research and reading the news.
To get an idea of the sort of cultural differences you’ll be dealing with, consider that after Psy’s ‘Gangnam Style’ song went viral, the value of his dad’s computer chip company doubled. And that’s no coincidence, the country’s retail investors love celebrity and speculation.
So, do your research and ready yourself for the economic amalgamation with Asia, because the way we’re heading it’s going to go off. Gangnam style.
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