The "Asian century" and the "Chinese century" are terms that you are virtually certain to be hearing with greater frequency and earnest. And with the forthcoming Olympic Games in China, the volume of this terminology is sure to intensify.
With the U.S. dollar cascading relative to many Asian currencies and with treasuries and sovereign wealth funds in the region bulging, it makes sense to seriously consider diversifying into this part of the world.
So here is an investment quiz to test -- and possibly enhance -- your knowledge of Asian/Pacific investments.
Feel free to use the many features available on
to help you answer the questions. A great place to start your search for investment knowledge is the "Search" box at the top of
Another great resource available on our Web site is a glossary of definitions and explanations of financial and investment terms. Just roll-over the "Portfolio & Tools" tab at the top of the site and select the "Glossary" option.
This investment quiz is a self-test, so keep your own score. Ready?
What are ADRs and ADSs?
If you are going to invest in individual stocks in the Asia/Pacific region, you should be familiar with these abbreviations. These actually apply to investments in most international stocks, not just those from the Asia/Pacific area. So you can eliminate the possibility of the "A" in each might stand for Asia.
What are the ASEAN nations and what is their significance?
When you research Asian investments, from time to time, you will see mentions of "ASEAN nations." These aren't misspelled references to Asian nations.
What are "red chips" and "H class" shares? Name the two countries primarily involved with these terms.
When you read about the U.S. stock market, you hear about "blue chip" stocks and publicly traded companies with "A" shares and "B" classes of stocks. But in researching Asian investments, you will come across mentions of "red chips" and "H" shares. It's important to understand what these terms mean
to be able to name the two countries primarily involved with these terms.
How long ago did the Japan Nikkei 225 index reach its all-time high?
At the Nikkei's level at end of March of this year, how much would it have to gain in order to match its highest-ever reading? Compare this with the U.S. Nasdaq composite index.
What was the best performing open-end mutual fund focusing on investments in the Asia/Pacific region for the 12-month period that ended March 31, 2008?
Unless you thoroughly research individual stocks in the Asia/Pacific region, the most practical way to invest in this part of the world will be by using mutual funds.
Also, consider what the best performing exchange-traded fund and closed-end fund from the Asia/Pacific group for the same period might be. Hint: These don't necessarily have to cover the entire region. Funds focused on one country or a group of countries in the region are sufficient.
Among those now in existence, what is the oldest open-end, closed-end and exchange-traded funds specializing in Asian/Pacific investments?
And while you're at it, what are the largest funds that focus on the Asia/Pacific region?
As many investors learned during the crash that followed the tech stock boom of the late 1990s, "chasing performance" can prove to be a disastrous strategy. Many Asian cultures respect old age to a greater degree than most people do in Western nations. So the best performing funds in question five (above) may actually not be great investment choices.
What is the name of the legendary investor who recently moved himself and his family to Asia because he believes the current century is going to be "the century of China?"
Plus, where in Asia did he move and for what reason (other than the growth potential of China)?
What is a U.S. exchange-traded fund with a portfolio holding in a Papua New Guinea-domiciled company?
And what is the name of stock?
If some of the preceding questions weren't tough enough, this is one that will surely challenge you. So for dedicated trivia buffs and puzzle fiends, question eight will test your skills to the limit.
If you decide to research the investment potential of the Asia/Pacific area in-person and travel around the region, you are certain to visit the Australia-New Zealand region. If a flight takes you over Papua New Guinea, you might wonder if any U.S. funds invest in companies from that nation.
There are actually two ETFs with holdings of firms domiciled in the country. Some skilled Internet search work combined with common-sense investment logic will reveal one of them.
Ready for the answers to questions to one through eight?
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
glossary as follows:
American Depositary Receipts (ADR): Shares of hundreds of major overseas-based companies, including names such as
, 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
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
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
, up 34.07% for the period. For closed-end funds, the leader was the
Morgan Stanley China A Share Fund
, 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
with a first public offering date of April 19, 1962.
For closed-end funds, the senior citizen of Asian investments is the
, 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
iShares MSCI Hong Kong
The largest Asian/Pacific open-end fund is the
Vanguard Pacific Stock Index Fund
. 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
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
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
, which in its Nov. 20, 2007 annual report listed a position of 583 shares of Papua New Guinea-domiciled
Lihir Gold Ltd.
( LIHR) 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
. 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
, which as of April 29, 2008, listed Lihir Gold Ltd. as making up 0.10% of its holdings.
Richard Widows has a long-term retirement account ownership positions in the Korea Fund, the iShares MSCI Hong Kong ETF and the Vanguard Pacific Stock Index Fund.
Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.