Here’s how to invest on Asian stock exchanges

Investing in Asian stock exchanges represents an attractive opportunity for investors who wish to participate in economic growth and exploit the potential of rapidly expanding markets. Asia is a dynamic and diverse continent, comprising developed economies such as Hong Kong, Japan and Singapore, and emerging markets such as China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.

Accessing Asian stock exchanges, however, can be complex and costly for individual investors. Fortunately, there are several strategies and tools to overcome these challenges and successfully invest in these regions. One of the simplest and most convenient options is to use the ETF (Exchange Traded Fund) which track the performance of important Asian market indices, such as for example the MSCI Asia index, or the CFD.

This guide provides essential information on how to invest in Asian stock exchanges, illustrating the different opportunities and approaches available. We will explore the main markets, investment options and key factors to consider in order to make informed and profitable investments in Asian stock exchanges.

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What are the major Asian stock exchanges?

Investing in Asian stock exchanges means betting on one of the most dynamic economic regions in the world. The main Asian stock exchanges by market capitalization are located in Shanghai, Tokyo, Hong Kong and Mumbai.

The Shanghai Stock Exchange (SSE) is the leading stock market in Asia and China, with a market capitalization of $6.5 trillion in 2022, and is the second largest stock exchange globally after the American New York Stock Exchange (NYSE) and Nasdaq. Its benchmark index, the CSI 300, recorded a 141% growth from January to May 2023. The CSI 300 index was designed to track the performance of the top 300 stocks listed on both the Shanghai Stock Exchange and on the Shenzhen Stock Exchange, which has a smaller capitalization.

The Tokyo Stock Exchange (TSE), founded in 1878, is the fifth largest global stock market by market capitalization, with $5.4 trillion.

The Hong Kong Stock Exchange (HKSE) has a market capitalization of $4.2 trillion, with the benchmark Hang Seng index.

The Mumbai Stock Exchange was founded in 1992 and is the third largest in Asia, ahead of other Asian stock exchanges. The National Stock Exchange of India (NSE) has a market capitalization of $3.14 trillion and the benchmark index is the NIFTY 50.

When Asian Stock Exchanges Open

The Tokyo Stock Exchange, also known as the TSE (Tokyo Stock Exchange), is the largest stock exchange in Japan and the third largest stock exchange in the world by market capitalization. The opening time is 9:00 in the morning and the closing time is 15:00 local time. Trading is suspended for one hour between 11:30 and 12:30 (4:30-5:30 in Italy).

The Hong Kong Stock Exchange, also known as HKEx (Hong Kong Exchanges and Clearing), is the main stock exchange in China. The opening time is 9:30 in the morning and the closing time is 16:00 local time (10:00 in Italy).

The Shanghai Stock Exchange is the largest stock exchange in China and the fifth-largest stock exchange in the world by market capitalization. The Shanghai Stock Exchange (SSE) is open Monday to Friday from 9:30 in the morning (local time) to 11:30 (morning session) and 1:00 to 3:00 pm (afternoon session). The exchange has extended trading hours, with a pre-trade session between 9.15 and 9.25 and a post-trade session between 15:00 and 15.30 local time.

The Shenzhen Stock Exchange is the third-largest stock exchange in China and the fifth-largest stock exchange in the world by market capitalization. Shenzhen Stock Exchange Index (SZSE) trading hours are Monday through Friday, 9:30 to 11:30 in the morning session and 13:00 to 14:57 in the afternoon.

India has two major stock exchanges, the Bombay Stock Exchange (BSE), the oldest in Asia (established in 1875), and the National Stock Exchange (NSE), created in 1992. Both exchanges are open Monday through Friday from 9:15 to 15:30 local time. They have a pre-trade session between 9:00 and 9:15 and a post-trade session between 15:40 and 16:00. Transactions are made in Indian rupees (INR).

Why should you invest in the Asian market?

Asian stock exchanges offer an investment opportunity in the long term due to their growth potential and resilience to managing the pandemic. The growth prospects for Asian markets are very attractive, with estimates predicting earnings growth of more than 10% in 2023.

According to forecasts by Oxford Economics, Refinitiv Datastream, and Pictet Asset Management, Asian growth will continue to significantly outpace the rest of the world. Emerging Asia is projected to contribute more than 50% of global growth by 2045. According to experts, China is creating an economic zone based on the renminbi, which currently accounts for about 25% of global GDP. This percentage is expected to increase further due to increasing de-dollarization and the US current account deficit.

Three major investment areas in Asia, besides China, are Taiwan, Korea , and India. Taiwan and Korea are leading semiconductor markets. India is undergoing a period of transformation, moving from an austerity-driven fiscal approach to growth and infrastructure.

Developing countries such as the Philippines, Thailand, Indonesia, and Vietnam are still evolving their economies. They benefit from growing regional supply chains as China moves up the value chain. For example, Vietnam experienced steady growth in 2020, becoming the only country with an increase in GDP during the pandemic. Indonesia has implemented numerous reforms and has great growth potential, especially in the microfinance sector.

Overall, Asia offers attractive investment opportunities due to its long-term growth potential and positive economic outlook in several areas of the region. Also, investing in Asian stock exchanges is an easy way to diversify your portfolio. However, it is important to carefully evaluate country-specific risks and ongoing economic and political dynamics before making investment decisions.

Access to Asian stock exchanges for foreign investors

access to Asian stock exchanges can be complicated for individual investors.

For example, in the China stock market there are different categories of shares: onshore and offshore.

The onshore shares, traded in mainland China, are mainly class A and represent companies driving domestic economic growth. However, they are only available to local Chinese investors and qualified foreign institutional investors (QFIIs).

Offshore shares, on the other hand, are listed on the Hong Kong and US stock exchanges. They were the only option for foreign investors until Class A shares were opened. These shares are mainly represented by prominent global technology leaders with a strong international presence. In addition, there are also class H shares, which are Chinese shares listed in Hong Kong.

However, direct access to these shares can be complex and expensive in terms of fees. Investors may therefore consider using ADR (American Depositary Receipts) to invest in Chinese securities. ADRs are depository receipts issued by US custodian banks and listed on US stock exchanges. They represent shares of foreign companies such as TSMC, Alibaba , and Petrobras.

Even in the Indian market, there are entry barriers that make it difficult for foreign private investors to participate, unless they have high net worth and FPI (Foreign Portfolio Investor) status.

An easy and convenient way to invest in Asian stock exchanges is through ETFs (Exchange-Traded Funds), which track a broad market index. ETFs offer diversification and low-cost liquidity, allowing investors to access the entire Asian stock market. Alternatively, you can buy CFD on Chinese stocks or indices to take advantage of leverage.

The best Asian ETFs

Investing in Asian stock exchanges easily and cheaply can be done through an ETF that tracks the MSCI Asia index. This index represents a broad range of Asian companies, including developed countries such as Hong Kong, Japan, and Singapore. It also includes emerging markets such as China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan, and Thailand. It is the primary benchmark used by fund managers to invest in Asia.

Here is a summary of the investments in the best-emerging markets funds focused on Asia:

• Lemanik Sicav Asian Opportunity Cap Retail Eur: an equity fund investing primarily in debt and equity securities issued by companies Launched in 1994, it has achieved a return of 10.40% over three years (Morningstar). The portfolio invests 54% in Japan, 27% in Emerging Asia, and 17% in Developed Asia. The most relevant sectors are industrial goods and technology.

• Carmignac Emergents Class A Eur Acc: equity fund focused on developing countries in Asia, Latin America, Eastern Europe, the Middle East, and Africa. Launched in 1997, it has achieved a return of 5.97% over three years. The predominant sectors in the portfolio are consumer goods and technology. Developing Asia represents 49% of the portfolio, while developed Asia represents 31%.

• Acomea Asia Pacific A1: is an equity fund with a main focus on the Asian market. Launched in 2000, it has achieved a return of 12.55% over three years. The portfolio invests 67% in Japan, 14.75% in Emerging Asia, and 11% in Developed Asia. The most relevant sectors are technology, consumer goods, and industrial goods.

• RAM (Lux) Systematic Funds – Emerging Markets Equities Class F: A dollar-denominated equity fund focusing primarily on emerging markets, with a particular focus on Asia. Launched in 2009, it has achieved a return of 11.61% over three years. The predominant sectors in the portfolio are finance and technology. Developing Asia represents 33% of the portfolio, while developed Asia represents 37%.

• FF – Pacific Fund – A – USD: mainly focuses on the Japanese equity market, but also invests in Southeast Asia and Australia. Launched in 1994, it has achieved a return of 6.43% over three years. The portfolio invests 32% in Japan, 34% in Emerging Asia, and 19% in Developed Asia. The most relevant sectors are technology, consumer goods, and finance.

Original article published on Money.it Italy 2023-06-20 08:05:00. Original title: Come investire nelle borse asiatiche