How to Crack the Asia/Pacific Investment Code

Answer to Question 1: If you want to be an international investor, you need to understand the terms ADR and ADS.

ADR is defined in the TheStreet.com's glossary as follows:

American Depositary Receipts (ADR): Shares of hundreds of major overseas-based companies, including names such as British Petroleum (BP - Cramer's Take - Stockpickr), Sony (SNE - Cramer's Take - Stockpickr), and Toyota (TM - Cramer's Take - Stockpickr), are traded as ADRs on U.S. stock markets in U.S. dollars.

ADRs are actually receipts issued by U.S. banks that hold actual shares of the companies' stocks. They let you diversify into international markets without having to purchase shares on overseas exchanges or through mutual funds.

ADS is defined in the TheStreet.com's glossary as follows:

American Depositary Shares (ADS): When a company based overseas wants to sell its shares in the U.S. markets, it can offer them through a U.S. bank, which is known as the depositary.

The depositary bank holds the issuing company's shares, known as American depositary shares (ADSs), and offers them to investors as certificates known as American depositary receipts (ADRs). Each ADR represents a specific number of ADSs.

ADRs are quoted in US dollars and trade on US markets just like ordinary shares. While hundreds are listed on the major exchanges, the majority are traded over the counter, usually because they're too small to meet exchange listing requirements.

Answer to Question 2: ASEAN -- the Association of Southeast Asian Nations -- is an economic alliance of 10 "emerging markets" nations, including Singapore, Indonesia, Malaysia, Thailand, the Philippines, Brunei, Vietnam, Laos, Cambodia and Myanmar. The more economically advanced members have frequently been described as the "Asian tigers" because of their growth and investment appeal.

Answer to Question 3: "Red chips" are mainland Chinese companies that are incorporated outside of China and listed in Hong Kong.

"H shares" are Chinese companies issued in China under Chinese law, but listed on the Hong Kong Stock Exchange. To further complicate things, the two primary mainland Chinese stock exchanges, Shanghai and Shenzhen, list Chinese "A" shares that are available to Chinese citizens and "B" shares that are reserved for foreigners.

Answer to Question 4: The Japan Nikkei 225 Index reached its all-time closing high of 38915.87 more than 18 years ago, on Dec. 29, 1989.

At the end of March of this year, it stood at 12525.54 -- down 68.7% from its zenith. So it would have to gain 210.7% to reach a new high. The U.S. Nasdaq index, at 2279.10 at the end of March, was down 54.9% from its all-time closing high of eight years ago (5048.62 on March 10, 2000). So it would have to advance 121.5% to claim new high ground.

Answer to Question 5: A look at the shrinkage of the Japanese market in the above answer might provide a clue that the best Asian mutual fund would be one "short" on the Japanese market. It turns out that the ProFunds UltraShort Japan Fund (UKPIX - Cramer's Take - Stockpickr) was the leading Asian-focused fund for the 12 months ended March 31, 2008, with a total return of 65.20%. The top-performing Asian ETF was the iPath MSCI India Index ETN (INP - Cramer's Take - Stockpickr), up 34.07% for the period. For closed-end funds, the leader was the Morgan Stanley China A Share Fund (CAF - Cramer's Take - Stockpickr), with a market return of 61.78%.

Answer to Question 6: The oldest open-end mutual fund focused on the Asian/Pacific region is the Fidelity Japan Fund (SJPNX - Cramer's Take - Stockpickr) with a first public offering date of April 19, 1962.

For closed-end funds, the senior citizen of Asian investments is the Korea Fund (KF - Cramer's Take - Stockpickr), which has been around since Aug. 19, 1984. March 12, 1996 was a landmark date for Asian/Pacific ETFs, as quintuplets arrived that day. We didn't research the birth order, but the new arrivals on that date were, in alphabetical order: iShares MSCI Australia (EWA - Cramer's Take - Stockpickr); iShares MSCI Hong Kong (EWH - Cramer's Take - Stockpickr); iShares Japan (EWJ - Cramer's Take - Stockpickr); iShares Malaysia(EWM - Cramer's Take - Stockpickr); and iShares Singapore(EWS - Cramer's Take - Stockpickr).

The largest Asian/Pacific open-end fund is the Vanguard Pacific Stock Index Fund (VPACX - Cramer's Take - Stockpickr). Its three classes of shares have a combined net asset value of $13.61 billion. The largest Asian-focused ETF is iShares MSCI Japan with assets of $11.78 billion. The biggest Asian closed-end fund is India Fund(IFN - Cramer's Take - Stockpickr) at $2.75 billion.

Answer to Question 7: James B. ("Jim") Rogers, Jr., co-founder with George Soros of the Quantum Fund, said about China in a recent Barron's interview: "The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China."

Rogers put his address where his mouth is when he recently moved to Singapore so his daughters would grow up fluent in Mandarin Chinese. He felt the air quality was better in Singapore than in the large mainland Chinese cities.

Answer to Question 8: An ETF holding a Papua New Guinea-domiciled company is the Fidelity Nasdaq Composite Index Tracking Stock ETF(ONEQ - Cramer's Take - Stockpickr), which in its Nov. 20, 2007 annual report listed a position of 583 shares of Papua New Guinea-domiciled Lihir Gold Ltd. (LIHR - Cramer's Take - Stockpickr) valued at $19,554.

A logical first step in answering question eight would be to access the Web site of the Port Moresby Stock Exchange Ltd., which lists the Papua New Guinea-domiciled stocks. The exchange's site is easily found using a search engine such as Google (GOOG - Cramer's Take - Stockpickr). Then it would have been helpful to check to see if any of the stocks trade in the United States. It turns out that Lihir Gold Ltd. is the only one with a U.S.-listed ADR, which makes it a logical choice.

The correct course would then be to note that the Lihir Gold Ltd. ADR is listed on the Nasdaq. So it would be logical that an ETF with a NASDAQ portfolio would be the fund to hold that stock. This would lead to the Nasdaq Composite Index Tracking Stock ETF.

The only other ETF we could find with a Papua New Guinea holding is the BLDGRS Developed Markets 100 ADR Index Fund (ADRD - Cramer's Take - Stockpickr), which as of April 29, 2008, listed Lihir Gold Ltd. as making up 0.10% of its holdings.