Investment Opportunities: Top 10 Asian ETFs for Purchase in the Year 2022
In the dynamic world of exchange-traded funds (ETFs), active strategies in the Asia-Pacific region are experiencing significant growth and increasing investor interest. This surge is driven by a combination of market dynamics, evolving investor preferences, and supportive policy frameworks.
One notable example of this trend is iShares MSCI Japan ETF (NYSE:EWJ), which was established in 1996 and seeks to track the investment results of the MSCI Japan Index. As of June 10, the total assets under management amount to approximately $9.70 billion.
The Asia-Pacific ETF market is projected to reach USD 1.7 trillion in 2025 and grow at a compound annual growth rate (CAGR) of 6.81% to USD 2.36 trillion by 2030. This expansion is particularly notable in countries such as Australia, South Korea, and Taiwan, contributing a +1.3% impact to forecasted ETF growth in the region.
Retail investors hold a majority (61.4%) of ETF assets in Asia-Pacific, a stark contrast with North America’s institutional dominance. This surge is fueled by mobile-first digital investment platforms that simplify access and reduce entry barriers for individual investors.
Surveys show that 96% of investors plan to increase their ETF allocations within a year, with millennials particularly drawn to innovative themes including cryptocurrency-related ETFs. Additionally, there is a growing demand for thematic and ESG (Environmental, Social, and Governance) ETFs, indicating a broader shift toward socially conscious and forward-looking investment strategies.
Government incentives and institutional adoption are also driving the growth of active ETFs in the region. Tax incentives in countries such as Japan, South Korea, and Singapore support ETF adoption, and there is increasing institutional use of fixed-income ETFs in markets like Japan, Australia, and Hong Kong.
Investors are drawn to active ETFs for several reasons. They offer dynamic management that can exploit growth opportunities in the diverse and fast-growing Asia-Pacific economies, particularly in emerging markets and sectors less efficiently captured by passive funds. Furthermore, active ETFs provide flexibility to adapt and manage risk more effectively in the volatile and complex market environment characterised by geopolitical tensions, inflation, and rapid technological change.
The rise of digital platforms lowers barriers for retail investors, creating a broadening investor base eager for sophisticated products like active ETFs that can pursue thematic growth (e.g., AI, green tech). There is also a preference for thematic and ESG investment, aligning portfolio construction with evolving social values and regulatory trends in the region.
JD.com, Inc. (NASDAQ:JD) is one of the top holdings of SPDR S&P Emerging Asia Pacific ETF (NYSE:GMF), while Toyota Motor Corporation (NYSE:TM) is the biggest holding of iShares MSCI Japan ETF (NYSE:EWJ). Other notable holdings include Alibaba Group Holding Limited (NYSE:BABA) in Vanguard FTSE Asia ex Japan Shares Index ETF (ASX:VAE) and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in Fisher Asset Management's portfolio.
Investors seeking controlled exposure to emerging markets are increasingly turning to Asian ETFs. In the last week of May, equity ETFs had inflows of $15.76 billion, the highest in nine weeks, and money poured into active ETF strategies in Asia Pacific ex-Japan.
Sean Cunningham, the Hong Kong-based Asia head of ETFs at JPMorgan Asset Management, observed a significant rise in interest in active ETFs in the region over the last two years. This trend is expected to continue, as investors increasingly allocate to active ETFs to harness growth opportunities, manage market complexity, and align with emerging investment themes across the Asia-Pacific region.
- In the Asia-Pacific region, investors are increasingly allocating to active ETFs to harness growth opportunities and manage market complexity, particularly in the finance sector, driven by factors like evolving investor preferences and supportive policy frameworks.
- As the Asia-Pacific ETF market continues to expand, there is an growing interest in thematic and socially conscious ETFs, such as those focusing on cryptocurrency, AI, and green technology, among retail investors who are eager for sophisticated products like active ETFs.
