How to Invest in Asian Stocks

Asia is the world’s largest continent – both in terms of area and population. Some investors see Asian stocks as a lucrative investment. This moneyland.ch guide answers the most important questions about investing in Asia’s stock markets.

What makes Asia interesting for investors?

Many Asian countries are expected to see major economic growth in the future. Examples of countries whose economies have developed rapidly in recent years include China, Vietnam, Singapore, Thailand, the Philippines, India, Indonesia, and Malaysia. The rapid population growth seen in countries like India is another indication that the region will gain in importance over time.

Targeted investments in Asia can also help to balance the geographic risks found in the US-centric portfolios of major global stock indexes. The Asian component of these indexes is generally smaller than the US component. Some indexes do not include any Asian countries at all.

Which stock indexes track multiple Asian countries?

There are a number of regional Asian stock indexes that you can invest in using exchange-traded funds (ETFs).

Table 1: Overview of stock indexes that track the Asia-Pacific region

* China and Hongkong are counted as separate countries.

The indexes shown in Table 1 are focused on the broader Asia-Pacific region, and have several peculiarities:

• Australia and New Zealand are included: Depending on which index you use, your money may be invested outside of Asia as well. That is generally the case with indexes that include the term “Pacific” in their titles. Most of these indexes include Australia and New Zealand as well. What is more, Australian stocks often make up a substantial portion of the index.
• Japan is excluded: The majority of the indexes shown in Table 1 include the term “ex Japan” in their titles. These are sub-indexes that explicitly do not account for the Japanese stock market. The MSCI Emerging Markets Asia index also does not include any Japanese stocks because the “Land of the Rising Sun” is not considered to be a developing country (emerging market). If you want to invest in Japanese stocks as well, you can use an ETF that replicates Japan’s Nikkei 225 and Topix indexes.

Which ETFs can I use to invest in Asian stocks?

Each of the stock indexes shown in Table 1 has one or more ETFs that replicate the index. These funds, which are traded on stock exchanges, are passively managed, which makes them relatively affordable to use (particularly when compared to actively managed mutual funds).

Table 2: The cheapest ETFs (by TER) for investing in Asian stock market indexes

Daten gemäss Anbietern und justetf.com. Stand: 04.12.2024.

When investing in ETFs, you should carefully review and compare the various fees you may be charged. Firstly, it is important to check the fees charged by the fund itself. The fund’s fees are shown as its total expense ratio (TER).

Secondly, the stockbroker you use to buy, hold, and sell ETF shares also determines your overall investment costs. Custody fees and brokerage fees vary between stockbrokers. Tip: You can find the cheapest stock broker for your investment needs using the interactive online trading comparison on moneyland.ch.

You can also invest in Asian ETFs using the Swiss neobanks Yuh and Neon. However, not all of the ETFs in Table 2 are offered by these neobanks.

Can I invest in individual Asian countries using ETFs?

It is possible to invest in the stock markets of individual Asian countries using ETFs. But the availability of ETFs varies depending on which country you want to invest in, and which stockbroker you use.

Countries that you can invest using ETFs that replicate national stock indexes include:

• China (mainland)
• Hongkong
• India
• Indonesia
• Israel
• Japan
• Qatar
• Malaysia
• Pakistan
• The Philippines
• Saudi-Arabia
• Singapore
• South Korea
• Taiwan
• Thailand
• United Arab Emirates
• Vietnam

Targeted investments in specific Asian countries can provide a way to iron out imbalances in broader stock indexes and balance your overall stock portfolio.

How much do Swiss stockbrokers charge for trades in Asian stocks?

It is common for Swiss stockbrokers to charge different brokerage fees depending on which stock exchange you use to buy and sell shares in an ETF. Others have just one fee that applies to trades on all major stock exchanges.

Table 3. Brokerage fees for CHF 7500 worth of shares in the ETF iShares MSCI EM Asia UCITS ETF (Acc)

*USD 9, converted to Swiss francs at the rate on December 5, 2024, as published by Investing.com, plus the CHF 0.85 real-time fee.
Source: Data published by the banks themselves. The brokerage fees shown do not account for stamp duties, possible stock exchange fees, or custody fees. The brokerage fees shown apply to purchases of ETF shares traded on the SIX Swiss Exchange. Date: December 6, 2024.

Important: Other costs like custody fees, currency conversion fees, stock exchange fees, and obligatory Swiss stamp duties are not accounted for in Table 3. Many stockbrokers incorporate the stock exchange fees into their brokerage fees, while others charge them on top of brokerage fees. Stamp duties are always the same regardless of which Swiss stockbroker you use.

The interactive Swiss stockbroker comparison on moneyland.ch can help you get an overview of the different accounts offered and find the right stockbroker for your needs. You can find more information in the checklist for choosing a stockbroker.

Can I buy shares in individual Asian companies?

It is possible to buy shares in the individual stocks of many Asian companies. But it is important to understand that investing in just a few companies exposes you to a much higher risk of loss, compared to investing in a plethora of different companies using a diversified stock ETF.

Stockbrokers may charge higher brokerage fees when you buy and sell stocks on more “exotic” stock exchanges. That is often the case with stock exchanges that are less known and have less liquidity – such as those in Indonesia and Malaysia. Some Swiss stockbrokers do not trade on certain stock exchanges at all.

The Shanghai and Shenzhen stock exchanges are hardly accessible to private investors outside of China. The easiest way to invest in Chinese companies is to use the Hong Kong Stock Exchange, on which many Chinese companies have a secondary listing. Some Chinese stocks are also available on US stock exchanges. For example, American Depository Receipts (ADRs) for Alibaba and Baidu are available on the New York Stock Exchange and Nasdaq respectively. Important: Holding ADRs does not entitle you to the same legal rights that holding shares does. Using ADRs may also incur ongoing ADR fees.

Tip: The interactive stockbroker comparison on moneyland.ch lets you filter Swiss stockbrokers based on which stock exchanges are included in standard online access.

Are there any risks and disadvantages that I should be aware of?

Investing in securities always comes with risks. Losses can never be ruled out at any time. Additionally, there are some other risks that come with investing in Asian stocks directly or using ETFs.

• Concentration risk: While targeted investments in Asia can help to diversify your investment portfolio, Asian stock indexes are, themselves, not particularly well diversified. There is a concentration risk because the indexes are dominated by just a few countries – and primarily China.
• Indexes exclude many Asian countries: The majority of Asia’s countries do not even feature in key Asian stock market indexes. Countries in the Middle-East, for example, are not even included in the Asia-Pacific region. Many of the indexes that you can invest in using ETFs do not include Japan, which happens to be Asia’s second-largest economy. Instead, the indexes often include non-Asian countries – namely Australia and New Zealand. Tip: If you want to invest in the Japanese stock market, you can add an ETF that tracks Japan’s main stock indexes, the Nikkei 225 and Topix, to your investment portfolio.
• Geopolitical risks: Asia encompasses many different countries with different political systems. Some Asian countries are involved in geopolitical conflicts. Make sure to account for political risks when investing.
• Information void: Asian countries and companies are not as familiar to Swiss private investors as companies in Switzerland, and those in many European countries. The rule of thumb for investing is to only invest your money in assets that you know and understand.

How well do Asian stocks perform?

A performance comparison between an ETF that invest in Asian stocks and an ETF that replicates the MSCI World global index shows that Asian stocks lag behind. That has been true both over the past five years, and the past 10 years. However, it is important to note that these figures only apply to specific historical periods. There is no way to predict how stocks and ETFs will perform in the future based on historical data.

Table 4: Performance comparison between ETFs that track the MSCI Asia Ex Japan index, the MSCI Emerging Markets Asia index, and the MSCI World index

Source: Justetf.com. Performance in CHF, accounting for dividends, but not accounting for possible custody fees, brokerage fees, and other investment costs. Dates used for performance comparisons: December 4, 2014; December 4, 2019; December 4, 2024.

Disclaimer: This article is provided for informational purposes only, and should not be considered as investment advice. The publishers do not accept any liability in connection with this article.

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