First Asean-focused ETF launched - Financial Times

By Kevin Brown in Singapore

Published: February 16 2011 17:40 | Last updated: February 16 2011 22:30

A New York fund manager will today launch the world’s first exchange-traded fund focused on the Asean region, reflecting what some people see as the emergence of a new asset class in developing Asia.

Global X Funds, which runs ETFs tracking the Nordic and Andean regions, says the launch reflects increasing institutional interest in the Association of Southeast Asian Nations, a fast growing 10 country organisation that is rapidly moving towards greater economic integration.
The ETF, listed on the New York Stock Exchange, will be based on the FTSE Asean 40 index, which tracks the largest companies in the five biggest Asean economies – Singapore, Malaysia, Indonesia, Thailand and the Philippines.

These countries account for the bulk of economic and markets activity in the region, although the five other members – Vietnam, Laos, Cambodia, Burma and Brunei – are developing rapidly.

Bruno del Ama, Global X chief executive, says the launch of the fund was driven by demands from US institutions for an easier way of investing in the region, which has historically been overshadowed by the major Asian economies of east and south Asia.

The timing of the Asean ETF launch looks awkward, given that markets in the region have been declining or relatively flat this year, after rising strongly last year.

The FTSE Asean 40 ended 2010 up 28.22 per cent, but was down 1.64 per cent at the end of January compared with December.

There has been a significant outflow of funds in the past few weeks as investors have withdrawn cash from emerging markets amid worries over food and energy prices and political stability.

The suggestion that investors are awaiting a chance to invest in the Asean as a unit is questioned by some analysts and economists, who say the regional grouping is largely irrelevant to the image of the individual countries, which attract investors because of their fast growth rates. Singapore’s gross domestic product expanded by 14.7 per cent last year.

“Most investors still see this region as a group of countries with their own niches,” says Tai Hui, an economist at Standard Chartered bank.

“Interest is not so much linked to Asean as a unit, but rather still attached to its members.”

Many bankers and traders say the region is rapidly emerging from the shadows as companies and investors become more aware of its size and growth prospects, and more familiar with its companies.

With a population of 590m people, the Asean has an economy bigger than India’s, and aggregate stock market capitalisation of $1,750bn, according to the World Federation of Stock Exchanges, which is larger than both India and Brazil.

The region’s economies expanded by 7.5 per cent last year, according to the Asian Development Bank, which forecasts 5.4 per cent this year.

Much of the interest in Asean reflects a degree of economic integration that was regarded as impossible until recently