Want to Invest in Asian Stock Markets but Don't Know Where to Start?

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Do you want to invest in the fast-growing Asian stock markets but feel overwhelmed about where to begin? Actually, the simplest and most direct way is through Exchange-Traded Funds (ETFs). The Asian market’s share in the global total has grown from about 15% in 2000 to over 25%, demonstrating strong growth potential.

💡 Start Here

Your Asian investment journey can easily begin with the following popular ETFs:

• iShares MSCI All Country Asia ex Japan ETF (AAXJ)
• iShares MSCI China ETF (MCHI)
• KraneShares CSI China Internet ETF (KWEB)
• Tracker Fund of Hong Kong (2800.HK)
• Yuanta/P-shares Taiwan Top 50 ETF (0050.TW)

Key Points

• Investing in Asian stock markets, ETFs are a simple and direct method, with huge growth potential in the Asian market.
• When choosing an ETF, first clarify whether you want to invest in the entire Asia or a specific country, such as China or Taiwan.
• Assess your risk tolerance, as different ETFs have varying risk levels.
• Compare ETF management fees and bid-ask spreads, as these affect your investment returns.
• These ETFs can be purchased through brokerage accounts with low investment thresholds.

ETFs for Investing in the Entire Asian Stock Market

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If you want one-click investment with broad exposure to the entire Asian market rather than betting on a single country, the following two ETFs are tailor-made for you. They save you the trouble of researching specific conditions in each country, achieving maximum regional diversification.

Pan-Asia Investment: AAXJ

iShares MSCI All Country Asia ex Japan ETF (AAXJ) is one of the purest pan-Asia investment tools. Its name says it all: “All Country Asia ex Japan,” meaning it invests in all Asian countries except Japan.

Buying AAXJ is equivalent to purchasing leading companies’ stocks from multiple markets including mainland China, Taiwan, South Korea, and India in one go. This ETF tracks the MSCI All Country Asia ex Japan Index and is very suitable for investors who are bullish on the overall growth prospects of Asia but do not want to bear the risks of a single market.

Advantages and Disadvantages of AAXJ

• Advantages: Highly diversified, one investment covers multiple major Asian economies, effectively reducing risks from policies or economic fluctuations in a single country.
• Disadvantages: Relatively higher management fees, and the portfolio does not include Japan. If you are also bullish on the Japanese market, you need additional allocation.

To give you a clearer understanding of AAXJ, here are some of its key data:

Fees and Dividends

Historical Returns

Emerging Markets Core: IEMG

iShares Core MSCI Emerging Markets ETF (IEMG) is an ETF investing in global emerging markets, but it has an extremely high correlation with Asian stock markets. In fact, Asian companies dominate its holdings.

For those with limited budgets who want to heavily allocate to Asia while also accessing other emerging markets (such as Brazil and South Africa), IEMG is a highly cost-effective choice. Its management fee is lower than AAXJ, and liquidity is very good.

You can clearly see the presence of Asian giants from its top 10 holdings:

From the chart, you can see that Asian tech giants like TSMC, Tencent, and Samsung firmly occupy the top three positions.

Advantages and Disadvantages of IEMG

• Advantages: Low fees, strong liquidity. Not only heavy exposure to Asia but also access to growth opportunities in other emerging markets.
• Disadvantages: Not a pure Asia ETF. Its performance is affected by markets outside Asia (such as Latin America), making the investment target less precise.

ETFs Focusing on Chinese Core Assets

If you are particularly confident in the growth potential of the Chinese market, directly investing in ETFs tracking Chinese assets is a more precise choice. However, “investing in China” is a broad concept. Are you investing in Chinese concept stocks listed in the US, blue chips in Hong Kong, or purely the internet sector? These three represent completely different investment logics.

Below, we break down three ETFs representing different “Chinese assets” to help you make the most informed decision.

Investing in Chinese Concept Stocks: MCHI

iShares MSCI China ETF (MCHI) is one of the most mainstream and comprehensive tools for investing in the Chinese market. You can think of it as a “basket” of large-cap Chinese stocks. It tracks the MSCI China Index, covering large and mid-cap Chinese companies listed in mainland China, Hong Kong, and the US, allowing you broad exposure to various core sectors of the Chinese economy.

Buying MCHI means you are investing not only in tech giants but also in leaders of traditional industries. Look at its holdings to understand its comprehensiveness:

1. Tencent Holdings Ltd: 17.23%
2. Alibaba Group Holding Ltd: 11.74%
3. China Construction Bank Corp: 3.38%
4. Xiaomi Corp: 3.25%
5. PDD Holdings Inc: 2.86%
6. Meituan: 2.17%
7. Industrial and Commercial Bank of China Ltd: 1.82%
8. Ping An Insurance (Group) Co of China Ltd: 1.79%
9. NetEase Inc: 1.67%
10. BYD Co Ltd H Shares: 1.61%

You can see that although Tencent and Alibaba occupy a considerable portion, the portfolio also includes banking, insurance, manufacturing, and other traditional pillar industries.

Investment Logic of MCHI

• Advantages: Broad coverage and industry diversification. Compared to investing only in the internet, MCHI allows you to hold assets in finance, consumption, and other sectors for more balanced risk.
• Disadvantages: Significantly affected by US-China relations, as its key holdings are Chinese concept stocks listed in the US. At the same time, its performance is closely tied to China’s overall economic macro policies.

From historical returns, MCHI’s volatility also reflects the opportunities and challenges of the Chinese market:

Investing in Chinese Internet: KWEB

If you believe China’s future growth engine mainly comes from the digital economy and internet, then KraneShares CSI China Internet ETF (KWEB) is the sharp tool tailor-made for you. It abandons traditional industries and concentrates all firepower on Chinese internet giants.

KWEB’s portfolio is very pure, almost including all the well-known Chinese tech companies you can think of. This makes it a high-risk, high-potential-return investment tool.

Compare its top 10 holdings to see the significant difference from MCHI:

1. Alibaba Group Holding Ltd: 11.08%
2. Tencent Holdings Ltd: 11.07%
3. PDD Holdings Inc: 7.54%
4. Baidu Inc - Class A: 5.35%
5. Meituan - Class B: 5.03%
6. JD.com Inc - Class A: 4.91%
7. JD Health: 4.80%
8. Kanzhun Ltd - ADR: 4.33%
9. Kuaishou Technology: 4.22%
10. Trip.com Group Ltd: 4.18%

There is not a single bank or insurance company in this list—pure internet companies.

Investment Logic of KWEB

• Advantages: Precisely betting on high-growth tracks. If you firmly believe the Chinese internet industry can overcome challenges and continue growing, KWEB maximizes your potential returns.
• Disadvantages: Extremely concentrated risk. Its fate is tightly bound to internet industry policies, regulations, market competition, and profitability, with much higher volatility than MCHI.

KWEB’s performance fully reflects this high volatility:

Investing in Hong Kong Blue Chips: Tracker Fund (2800.HK)

Want to switch perspective and invest in more mature and stable assets? Then, turn your attention to the Hong Kong local market. Tracker Fund of Hong Kong (2800.HK) is the oldest and largest ETF on the Hong Kong Exchange, fully tracking Hong Kong’s benchmark index—the Hang Seng Index.

Investing in the Tracker Fund is equivalent to buying the 50 “anchor” companies in the Hong Kong stock market, mainly giants in finance, real estate, utilities, and other sectors. Although companies like Tencent and Alibaba are included (because they are listed in Hong Kong), the overall style is completely different from MCHI and KWEB, leaning more toward value and stability.

💡 Why Consider the Tracker Fund?

For investors seeking stability and low costs, the Tracker Fund is extremely attractive. Its management fee is very low, liquidity is excellent, and it is the top choice for investing in Hong Kong, this mature financial center.

Let’s look at its key data:

Its historical performance reflects the trends of the Hong Kong local economy and traditional blue chips:

In summary, choosing MCHI, KWEB, or the Tracker Fund depends on your risk preference and which aspect of the Chinese economy you are bullish on. Is it comprehensive large-cap stocks, aggressive internet, or stable Hong Kong blue chips? Clarify this question, and your investment direction becomes clear.

Highly Popular ETF for Investing in Taiwan Tech Leaders

When talking about Asian tech, you absolutely cannot ignore Taiwan’s core position in the global supply chain. If you want to precisely invest here, ETFs tracking the Taiwan market are your best choice.

Taiwan plays a key role in the global tech sector. It produces over 60% of the world’s semiconductors, contributing 15% to Taiwan’s GDP.

Taiwan Market Representative: Yuanta Taiwan 50 (0050)

Yuanta/P-shares Taiwan Top 50 (code: 0050.TW) is the most representative ETF in the Taiwan stock market. You can think of it as the “Taiwan version of the S&P 500 index fund.” It tracks the Taiwan 50 Index, with components being the 50 largest companies by market cap in Taiwan.

Investing in 0050 means you are buying not just the Taiwan market but the heart of the global tech industry chain. Its largest holding—Taiwan Semiconductor Manufacturing Company (TSMC)—is the world’s largest chip manufacturer, accounting for nearly half of the ETF’s weight alone. This means 0050’s performance is highly correlated with the global semiconductor industry’s prosperity.

Choosing to invest in 0050 gives you the following advantages:

• One-Click Exposure to Tech Core: Directly invest in the center of global semiconductor manufacturing.
• Share Dividends from Leading Companies: Hold top Taiwanese tech and traditional industry giants led by TSMC.
• Capture Global Tech Trends: Taiwanese companies provide key chips for global high-performance computing and AI applications, ensuring you don’t miss future tech waves.

Of course, you need to understand its fees and dividend situation for a more comprehensive judgment.

In summary, Yuanta Taiwan 50 is an ETF with distinct characteristics. It is very suitable for investors who are extremely bullish on the semiconductor industry and Taiwan’s position in the global tech supply chain. But you must also be aware of the unique risks and opportunities brought by its high concentration.

How to Choose the Most Suitable Asian ETF for You

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We have learned about several popular Asian ETFs, but which one is most suitable for you? Don’t worry; follow the three simple steps below, and you will find the answer. This process will help you clarify your investment thinking and make informed choices.

Step 1: Clarify Your Investment Region

First, ask yourself: Do I want to invest in the entire Asia or a specific country or region?

• Broad Exposure: If you are bullish on the growth of the entire Asian stock market but do not want to bear policy risks of a single country, pan-Asia ETFs like AAXJ are your top choice.
• Precise Betting: If you have particularly strong confidence in the Chinese or Taiwanese market, directly investing in MCHI or Yuanta Taiwan 50 will be more effective.

However, precise betting also means bearing specific geopolitical risks. For example, investing in China and Taiwan faces completely different risk considerations:

• Investing in China: You need to pay attention to US-China relations, multinational operations in China, and potential capital controls.
• Investing in Taiwan: You need to focus on its global position in the semiconductor industry, dependence on imported energy, and potential supply chain disruption risks.

Step 2: Assess Your Risk Preference

How high is your risk tolerance? This is a key question. Different ETFs have different risk levels. You can measure through two simple indicators:

Beta Value: Measures the ETF’s volatility relative to the overall market. A Beta greater than 1 means higher volatility than the market; less than 1 means lower.

Standard Deviation: Measures the fluctuation range of ETF returns. Higher standard deviation means potentially more dramatic price swings and higher risk.

For example, KWEB (China Internet ETF) focused on a single industry typically has much higher volatility than the industry-diversified MCHI (China large-cap ETF). Before choosing, think clearly whether you can handle the challenges of such high volatility.

Step 3: Compare Fees and Liquidity

Finally, don’t forget trading costs. Two key factors directly affect your final returns:

1. Management Fee (Expense Ratio): This is the fee the ETF company deducts annually from your investment. Don’t underestimate this fee; even small differences can significantly impact your wealth over years through compound interest. Lower fees mean more returns for you.
2. Bid-Ask Spread: This is the difference between the price you buy the ETF (ask price) and the price you sell (bid price). Smaller spreads indicate better liquidity and lower trading costs. When ready to trade, you can check real-time spreads on platforms like Biyapay and avoid placing orders when spreads are too wide.

Now, you clearly understand the positioning of different ETFs. AAXJ and IEMG help you with broad exposure, while MCHI, KWEB, Tracker Fund, and Yuanta Taiwan 50 allow precise betting on specific markets or industries. Through ETFs, the threshold to enter Asian markets is greatly lowered, and the investment process becomes simple and clear.

💡 Expert View J.P. Morgan Research predicts that emerging markets, including Asia, will perform strongly due to earnings growth and attractive valuations, with both China and South Korea markets having unique growth drivers.

This optimistic outlook provides more confidence for your investment in Asian stock markets. Now, use the framework from this article and boldly take your first step!

FAQ

How to Purchase These Asian ETFs?

You can purchase them through brokerage accounts that support US stocks or Hong Kong stocks trading. First, open an account and deposit funds. Then, search for the ETF’s ticker (such as AAXJ or 2800.HK) on the trading platform, and you can trade them like ordinary stocks.

Does Investing in ETFs Require a Lot of Money?

No. The threshold for investing in ETFs is very low. You need to buy at least one share, and many ETFs have affordable per-share prices. Some brokers even support fractional shares, allowing you to start investing with less money.

Do I Need to Consider Tax Issues When Investing in Asian ETFs?

Yes, you do. Dividends and capital gains you receive may be taxed. Specific tax rules depend on your nationality and residence. It is recommended to consult a professional tax advisor before investing to understand the relevant regulations.

Are These ETFs Risky?

Of course. All investments carry risks. ETF prices fluctuate with the market, and their value is affected by various factors such as economy, policies, and geopolitics in Asian regions. Please assess your risk tolerance before investing.