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Do Your Homework Before Going Overseas Part 2: Asia

Last week, we took a look at the fiscal health of European countries in search of stable ground on which to base an investment.

Today, we're moving across the globe to take the financial pulse of some of the Asian territories.

Now it's no guarantee that a nation that has its financial house in order will provide investors with security for their investments.

But with the level of global volatility in the markets in recent times, it is worth looking at which nations have played a conservative financial hand.

Here we look at the state of a nation's public finances, government deficits and surpluses. Obviously one wants to look at various factors in combination with public finances -- for example, current account balances, GDP growth and inflationary pressures.

Political stability and foreign exchange risks are other factors to consider but are outside the scope of the article.

Again, we use the Group of Seven countries for comparison as they are generally perceived as the world's economic leaders, even if they're not the healthiest nations.

Below is a table showing the G7 countries and their financial state along with other metrics.

Fiscal Health of Group of Seven Nations
1-Year %
Consumer Prices
1-Year %
Budget %
Account GDP
Jobless %
Canada 2.00% 2.00% 1.80% 2.30% 6.10%
France 2.20% 1.00% -2.20% -1.60% 8.50%
Germany 3.70% 1.60% -3.00% 4.10% 9.30%
U.K. 3.00% 3.70% -3.20% -2.20% 5.50%
Italy 2.80% 1.80% -3.40% -1.60% 6.50%
U.S. 3.10% 2.40% -3.60% -6.40% 4.50%
Japan 2.30% 0.00% -5.20% 3.60% 4.00%
Averages 2.73% 1.79% -2.69% -0.26% 6.34%
Source: Bloomberg

The G7 stats above, except for Canada, show a high level of indebtedness, especially the U.S., in regards to both internal and external accounts.

If you compare this to the table of Asian countries below, Singapore is clearly the nation with the best economic statistics, not only in the region but, arguably, in the world. For investors committed to the region and concerned about the state of the Chinese economy, Singapore offers the best option as a safe haven.

Singapore has a large federal surplus, a high gross domestic product growth rate and has the lowest consumer price inflation in the region. It also has an extraordinary external account surplus relative to its GDP and a low jobless rate.

Taiwan, Hong Kong and South Korea also boast solid numbers.

The Healthiest Asian Countries
1-Year %
Consumer Prices
1-Year %
Budget %
Account GDP
Jobless %
Singapore 7.90% 0.60% 6.00% 28.50% 2.60%
New Zealand 1.30% 2.60% 4.80% -8.90% 3.70%
Australia 2.80% 3.30% 2.30% -6.00% 4.60%
S. Korea 4.00% 2.20% 2.10% 2.10% 3.20%
Hong Kong 7.00% 0.80% 1.00% 11.40% 4.30%
China 10.40% 2.70% -1.30% 7.20% 4.10%
Taiwan 4.00% 1.70% -2.40% 4.70% 3.80%
India 8.60% 6.70% -4.20% -1.50% n/a
Averages 5.75% 2.58% 1.04% 4.69% 3.76%
Source: Bloomberg

Below are various funds that investors can choose from that were selected by Ratings. Note: The funds exposed to Taiwan have a low rating. However, Taiwanese funds are concentrated in the electronics and semiconductor space, so if you think these sectors may improve, then these funds may be for you.

Top-Rated Asian Funds
Name Ticker Ratings 1 Month Return 3 Month Return 6 Month Return YTD
iShares MSCI Singapore EWS A+ 8.04 19.06 44.37 11.52
Singapore Fund SGF B+ 14.64 32.83 64.67 18.35
iShares MSCI Hong Kong EWH B 1.77 9.77 23.02 4.31
iShares MSCI South Korea EWY B- 8.19 4.73 14.54 4.01
Korea Fund KF C+ 8.96 7.35 21.97 3.51
Korea Equity Fund KEF C+ 11 2.93 10.89 -1.22
iShares MSCI Taiwan EWT D 0.84 3.44 19.51 -0.28
Taiwan Fund TWN D -1.4 4.89 16.84 -1.35
Source: Ratings, Bloomberg
Sam Patel, CFA, is the manager of mutual fund research for the Ratings.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Patel cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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