Asia ETFs Could Indirectly Benefit from U.S., China Trade War

As the U.S. and China duke it out over the ongoing trade war disputes, other Asian economies and country-specific ETFs could benefit from the side.

Some researchers argue that countries exporting similar products that compete with China could end up as beneficiaries in the trade war between the U.S. and China, the Wall Street Journal reports.

For example, Bank of America Merrill Lynch economists predict Taiwan, Vietnam and South Korea have the most to gain, given the countries’ similar export profiles to China.

Furthermore, some Asian economies could capitalize on a redeployment of investment capital from wary companies that are operating in China but are looking to diversify away from the trade uncertainty. According to a recent survey conducted by the American Chamber of Commerce in South China, around 70% of companies are considering relocating some or all of their manufacturing out of China, with Southeast Asia indicated as the preferred destination.

The Economist Intelligence Unit projected that technology companies in Vietnam and Malaysia could strengthen while Thailand’s auto part producers could also benefit.

“The region’s traditional reliance on markets in the West obviated the need for a bigger liberalization push locally: intricate supply chains notwithstanding, economies tended to view each other more as competitors than collaborators,” Frederic Neumann, co-head of Asian economics research at HSBC, told the WSJ. “Well, that’s changing. The more restrictions are imposed elsewhere, the more the region will need to open internally if it wants to preserve trade as an engine of growth.”

ETF investors who believe that other Southeast Asian economies could capitalize on the trade dispute have a number of country-specific ETF options to pick and choose their country plays. For example, investors can look to the iShares MSCI Malaysia ETF (NYSEArca: EWM), iShares MSCI Taiwan ETF (NYSEArca: EWT), iShares MSCI South Korea Capped ETF (NYSEArca: EWY), VanEck Vectors Vietnam ETF (NYSEArca: VNM) and iShares MSCI Thailand Capped ETF (NYSEArca:THD), among others, for targeted exposures to the various Southeast Asian emerging economies.

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