Forget Local, Buy Global: ETFs For Asia’s Best Brand

by on November 26, 2012 | ETFs Mentioned:

The proliferation of ETFs has opened up the doors to international markets, bringing investors closer to high growth opportunities along with all of the cost-efficiency and ease-of-use benefits associated with this product structure. While countless investors continue to shed their home country bias, the growing trend of diversifying overseas has inevitably spawned a number challenges for investors at home. One of the biggest questions facing those who are eager to tap into foreign markets is whether to buy an ETF focused on small or large cap firms in the country [Download Free Report: How To Buy The Right ETF Every Time]. 

Large cap equities boast stability thanks to their multinational streams of revenue; small caps on the other hand stand to offer more of a “pure play” on the local economy given their greater sensitivity to local consumption and demographic trends. The distinction between small and large cap exposure can be a major one; one factor that may also play a key role, but is often overlooked, is the sheer brand power of the companies in which you are investing [see 7 ETFs For The Best Country Brands]. 

Market cap matters for investors, however it’s of little concern to consumers who are more likely to base their decisions around the recognition of the given brand. Think of it this way: Apple’s stock has posted phenomenal returns over the last few years because investors continue to be enticed; the bottom line driver of share price has been their powerful brand, which consumers all over the globe continue to embrace. Therefore, when looking to invest in a foreign country ETF to take advantage of robust consumption trends, it may be well worth it to consider funds with major allocations to well-known global brands [see Consumer Centric ETFdb Portfolio].

Given Asia’s rapidly growing population and increasing rates of urbanization, the consumer markets in this region are sprawling with opportunities for savvy retailers. Below we highlight three ETFs that hold big stakes in Asia’s top brand according to the Campaign Asia-Pacific 2012 Asia’s Top 1000 Brands report: Samsung (SSNLF) [Try our Free ETF Stock Exposure Tool].

Experts agree that Korean behemoth Samsung is Asia’s top brand as the company boasts a diverse lineup of high quality consumer electronics products, including everything from TVs and smartphones to air conditioners and refrigerators:

  • iShares MSCI South Korea Index Fund (EWY, B-): Samsung stock holds the number one spot in this portfolio, accounting for roughly 22% of EWY’s total assets. From a sector breakdown perspective, this ETF is tilted towards technology, while consumer cyclical stocks account for the next biggest chunk of exposure. 
  • iShares MSCI All Country Asia Information Technology Index Fund (AAIT, C+): This ETF, which is designed to capture the performance of IT companies in developed and emerging market countries in Asia, also has Samsung at the top of its list; AAIT allocates closes to 19% of total assets to this consumer electronics juggernaut. 
  • PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio (PAF, A): Even after using a fundamental methodology to selects securities based on book value, income, sales and dividends, this ETF still affords a hefty weight to Samsung stock; shares of the electronics brand king account for just under 7% of total assets in this ETF. 

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Disclosure: No positions at time of writing.