The trading scene in the Asia-Pacific region took a turn for the better in the first quarter of 2015 with fears of Fed tightening taking a pause and hopes for more policy easing taking center stage in several Asian nations. As a result, the key Asian bourses are now nearing the largest quarterly gains since 2012.

Investors should note that Asian shares nearly touched an eight-month high in mid March after the Fed’s dovish comments over the rate hiking issue. As the Fed indicated that it is in no hurry to hike rates, global equities including Asian shares soared (read: Asia-Pacific ETFs to Shine Following Fed's Dovish Stance).

To add to this, Chinese stocks recently surged to a seven-year high as the Chinese central bank lowered down-payments for second homes and widened a sales-tax exemption on March 30. The nation indicated ‘room for more easing measures if needed. As a result, First Trust Asia-Pacific ex-Japan AlphaDEX ETF (FPA) was up about 12% in the first quarter in comparison to 1.32% gains in SPDR S&P 500 ETF (SPY).

Investors should note that the latest surge was not devoid of occasional pitfalls. Most Asia-Pacific economies are heavy on commodity. Thus, the ongoing volatility in the metal and mining space in the wake of a stronger greenback weighed on the bourses of the commodity-centric economies like Australia. Almost all Australia ETFs and Australia-heavy Asia ETFs gave a poor show last week. MSCI Australia ETF (EWA) was off 2.3% over the last one week (as of March 30, 2015).

However, investors should not be bogged down by such short-lived downturns as the underlying momentum looks solid for Asia-Pacific right now. Some of the country ETFs have held their own lately, irrespective of market conditions, delivering gains for investors. We believe that these markets are intriguing options for many investors and definitely worth a closer look. Each of these has been briefly detailed below (see all Asia-Pacific (Developed) ETFs here):

Hong Kong AlphaDEX Fund (FHK)

Building hopes of further policy easing from China amid persistent sluggishness in the manufacturing sector pushed up the Hong Kong-based stocks.  Per Bloomberg, Chinese stocks trading in Hong Kong surged the most this year as authorities let additional mainland finances to use the city’s exchange link.

The fund provides exposure to total holdings of 40 stocks. The fund manages an asset base of $59.8 million. Among individual holdings, Goldin Financial Holdings Lt takes the top spot with a share of 10.6%. For the rest of the basket, the fund does not allocate more than 3.91%. For this, the fund charges an expense ratio of 80 basis points annually.

The fund is heavy on financials with more than 50% of exposure followed by industrials (14.44%) and consumer discretionary (10.92%) and utilities (10.52%). The fund added more than 4.7% in the last five trading sessions (as of March 30, 2015). FHK has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.  

MSCI South Korea Quality Mix ETF (QKOR)

In mid March, South Korea’s central bank cut its benchmark interest rate to an all-time low in a surprising move to avert deflation and boost economic growth. Apart from this monetary easing, South Korea benefits from low oil prices. Oil forms more than 30% of South Korea’s total imports, and as such, lower oil prices will significantly reduce the country’s import bill (read: 3 Country ETFs to Benefit from Falling Commodity Prices).

By holding about 106 stocks, this $2.7 million-fund intends to track the performance of the MSCI South Korea Quality Mix A-Series Index. Sector wise, IT takes the top spot with nearly 35% of total assets while consumer discretionary (20.5%), financials (12.5%), consumer staples (9.3%) and industrials (8.9%) make the top five sectors.

The fund has company-specific concentration risk with Samsung (18.9%) ruling the portfolio.  Hyundai Motor (4.8%) and Hyundai Mobis (4 %) round out the top three positions. QKOR also charges 40 bps in fees.  The fund was up 3.4% in the last five trading sessions (as of March 30, 2015) (read: 3 Country ETFs to Outshine in 2015).

iShares MSCI Singapore Small-Cap ETF (EWSS)

Singapore is another Asia-Pacific nation hoping on monetary easing. The Singapore central bank declared in January that it would lower ‘the slope of its currency band while sticking with a modest and gradual appreciation’. Analysts are expecting more stimuli from this island nation.

For investors seeking a pure play in the Singapore equity market, EWSS could be an interesting pick. The $12.6 million product tracks the MSCI Singapore Small Cap Index. EWSS invests in a cluster of 85 stocks.

However, the fund is not devoid of sector-specific risks. From a sector perspective, financials makes up 50% of the total exposure with a double-digit allocation to industrials. Company-specific risks are still moderate as no stock accounts for more than 5% of the fund.

 The fund charges a fee of 59 basis points annually. EWSS was up 2.4% in the last five trading sessions. The fund has a Zacks ETF Rank #2 (Buy).

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FT-AS PAC-JP AD (FPA): ETF Research Reports
 
SPDR-SP 500 TR (SPY): ETF Research Reports
 
ISHARS-AUSTRAL (EWA): ETF Research Reports
 
SPDR-MSCI SKQM (QKOR): ETF Research Reports
 
ISHARS-MS SG SC (EWSS): ETF Research Reports
 
FT-HONG KONG (FHK): ETF Research Reports
 
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