I’ve been wanting to get a bit more exposure to the ongoing growth of Asia in my portfolio. However, I’d prefer to do this through FTSE stocks rather than investing directly in Chinese or Indian companies.
Why Asia? Well, e-commerce is booming across the region as disposable incomes rise. And by 2050, four of the world’s seven largest economies are forecast to be there.
Therefore, I reckon large institutional investors will allocate more of their funds to the region over time, potentially boosting the value of its markets.
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Here are three FTSE stocks to consider buying to get some high-quality exposure.
A ready-made portfolio
First up, I’d go with Pacific Horizon Investment Trust (LSE:PHI). This Baillie Gifford-managed trust from the FTSE 250 oversees a diverse portfolio of stocks from all over Asia Pacific (excluding Japan).
This gives instant and broad-based exposure to India and China, as well as countries like Vietnam and Indonesia that are experiencing rapid economic development and urbanisation.
Top holdings include Samsung Electronics, Taiwan Semiconductor Manufacturing Company, and Indiabulls Real Estate.
Performance has been great. Over the five years to 31 July 2023, the net asset value (NAV) and share price total return were 82.4% and 62.4% respectively, versus 14.1% for the MSCI All Country Far East Index.
I already have some Pacific Horizon shares in my portfolio, but I’d like to buy more. One risk here though is that the shares can trade at a discount to the fund’s underlying NAV. Currently, the discount is 9.8%, which I think offers great value, but there’s no guarantee it will narrow. It could even widen.
Asia-focused banking
Next up, I’m going to highlight HSBC Holdings (LSE:HSBA). While the FTSE 100 banking giant has its roots in Asia, it’s deliberately increasing its presence there today to capitalise on the region’s growth potential.
It has sold off operations in France and North America, while expanding its wealth management services in the East to cater to the growing middle class and high-net-worth individuals.
Mind you, it does face plenty of competition in this space, especially in China, where adverse regulations can quickly arise. Plus, China’s economy isn’t firing on all cylinders right now, which could drag on earnings growth.
Still, the bank estimates that the number of millionaires across Asia is set to more than double from about 30m in 2022 to over 76m by 2030. So this seems a smart strategic pivot from a growth perspective.
The stock is trading very cheaply and offering a 7.1% dividend yield. I’ve been buying in recent months.
Cheap insurance play
Finally, there’s Prudential (LSE:PRU). Shares of the Asia-focused insurer have fallen 46% over the past five years. This has left them trading on a very cheap forward earnings multiple of just 9.4.
Admittedly, the firm has a lot of exposure to Hong Kong and China. If economic conditions worsen there and earnings fall, the share price could head even lower.
Nevertheless, I’ve been weighting up this stock for some time now. It looks dirt cheap relative to its long-term prospects and carries a 2.4% dividend yield.
Penetration rates for insurance products in many Asian countries are still low compared to developed markets. This presents a significant growth opportunity for Prudential as insurance demand rises.
