Asia Pacific ETFs posted big gains on Thursday following the release of updated growth projections from the International Monetary Fund that included upward revisions for the region for both this year and next. The region as a whole – including Japan, Australia, and New Zealand – is expected to grow by 2.8% for 2009 and 5.8% in 2010, about 1.5% more than the organization had projected in its previous May report.
The IMF data highlights the gap between Asian economies and the rest of the developed world, and sets the stage for a change in roles in the recovery that is already underway. While Asian economies and central banks have historically taken their lead from the U.S. following global downturns, that scenario is now reversed. Asian markets, both developed and emerging, have clearly emerged from the recession, while doubts continue to swirl around the U.S. and western Europe. Earlier this month, Australia became the first country to raise interest rates (Norway followed suit on Wednesday, proof that some pockets of Europe are much closer to a sustained recovery than others).
| Country/Region | 2009 Growth | 2010 Growth |
|---|---|---|
| Asia Pacific | 2.8% | 5.8% |
| China | 8.5% | 9.0% |
| Japan | (5.4%) | 1.7% |
| India | 5.4% | 6.4% |
| Advanced Economies | (3.4%) | 1.3% |
Not all Asian economies are in the clear. Japan is expected to record a full year contraction of more than 5% in 2009, and only expected to squeeze out growth of about 1.7% in 2010. Advanced economies in aggregate are projected to contract by 3.4% in 2009 and grow by 1.3% in 2010.
There is a strong correlation between projected growth and ETF performance so far in 2009. India, China, and the Asia Pacific region (excluding Japan) have posted strong gains, while Japan, Europe, and the U.S. have lagged far behind.
| Region | Ticker | ETF | YTD Return |
|---|---|---|---|
| Asia Pacific | EPP | iShares MSCI Pacific Ex-Japan Index Fund | 55.9% |
| China | FXI | iShares FTSE/Xinhua China 25 Index Fund | 48.0% |
| India | INP | iPath MSCI India Index ETN | 81.8% |
| Japan | EWJ | iShares MSCI Japan Index Fund | 0.9% |
| Europe | VGK | Vanguard European ETF | 31.1% |
| U.S. | IWV | iShares Russell 3000 | 19.1% |
Disclosure: No positions at time of writing.
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