What ASEAN Summit May Mean For Asia’s ETFs

Asian countries are seeking to form a single entity that would free up trade and this could remove economic impediments placed upon Asian markets, along with subsequent exchange traded funds (ETFs).

In South Korea, the Korea-ASEAN Special Summit will hopefully increase diplomatic ties with ASEAN, a geopolitical and economic organization of 10 countries in Southeast Asia with a combined GDP of $1.3 trillion, and promote regional economic cooperation, reports Ahn Choong-yong for The Korea Herald.

Recently, the ASEAN+3 (China, Japan and Korea) has developed a framework on regional cooperation that would include India, Australia and New Zealand to form an East Asian Summit. East Asia is seen to have the potential to form a collective group such as the EU or NAFTA.

An East Asian Free Trade Agreement (FTA) would benefit the region through geographic proximity, complementary endowments of production factors and growing economic ties. As the area becomes more of a free market with fewer economic barriers, businesses will export more and have more efficient economies of scale. Member countries will also have increased inflows of foreign direct investment, which would create more jobs and transfer technology.

But China and Japan, both vying for regional dominance, may hinder FTAs with ASEAN and could prolong the transition into an EAST Asian FTA.

• BLDRs Asia 50 ADR Index (ADRA): up 17.2% year-to-date

• iShares S&P Asia 50 Index (AIA): up 30.7% year-to-date

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