Asia’s size and influence on the world stage means it offers a great opportunity for investors. We explain why and how to invest in the Asian markets and outline the top Asian shares and ETFs to consider.
Asia is the home of some of the largest economies in the world, as well as some of the fastest-growing economies in the world. With 60% of the world's population living in Asia, these regions are seen as the new drivers of global growth. While China, Japan, and India grab most of the headlines, Vietnam, Indonesia, and the Philippines are near the top of the leaderboard.
Asia's markets are now a welcome addition to the portfolios of worldwide investors. However, Asia is a complex and dynamic market, and while there are exciting opportunities to be found, there are investing challenges ahead that will require a discerning, active approach to investment selection.
Investing in the Asian Markets - Quick Guide
- Choose how to invest in the Asian markets – Exchange-traded funds (EFTs), depository receipts (shares of a foreign company offered in another foreign market), indexes or currencies are some of the more common methods to invest in Asian markets.
- Define your strategy – trading lets you speculate on the price movement; dealing lets you take direct ownership of the shares of stocks and funds.
- Take your position – create an account with CAPEX.com to start investing in the Asian markets.
Why Invest in Asian Markets?
Asia is the world's fastest-growing economic region due to its population and late industrialization. It has sizable middle classes, big enterprises, and governments that are all keen to spend money and boost the economy. The world order has changed in ways that could have surprised people in the late 1990s due to China's ascent to prominence in just a few decades after its contract manufacturing economic model made it possible for it to become the largest economy in the world. Simultaneously, groups of Southeast and East Asian countries have outperformed many, if not most, of the European countries in terms of economic output thanks to globalization and trade.
A long runway for growth
Due to Asia's fast economic growth over the previous 20 years, investors now have chances in a wide range of markets and industries. More recently, the region's resilient economy has been greatly aided by demography and digitalization, which have fuelled commercial and economic progress. Going forward, experts think Asia will keep being a major factor in the expansion of the world economy.
The world's two most populous nations provide some of the best tailwinds for the growth of Asian markets: while China continues to be a global leader in consumption, innovative technologies, and manufacturing, India's middle class is expanding and will propel growth in some niche industries. The economies of the major Southeast Asian nations are also expanding, with Vietnam and Indonesia aiming to gain more traction in international supply chains. True, rising interest rates and inflation are posing economic issues for the developed world, but more favorable fundamentals support many Asian economies.
The argument for investing in Asian markets right now is stronger than ever for those looking for long-term growth and diversification. The investing horizon is still unpredictable, though, and it is still vital to use an active stock-picking strategy based on a thorough knowledge of regional markets and companies.
Demographics and technology are driving growth
As the number of individuals rising out of poverty continues, income levels are rising throughout Asia. China's economic growth over the past 20 years has propelled hundreds of millions of its people into the middle class. India is currently at the beginning of China's previous growth trajectory, and as its youthful population has greater access to economic possibilities, it is anticipated that millions more Indians will join Asia's middle class in the next decades.
Over the coming decades, there should be a large demand for products and services in the region due to higher disposable incomes. Additionally, technology is amplifying the impact of this power use, with new payment options sparking an explosion in e-commerce. Asia's e-commerce market is led by China, and the region's revenues have surpassed those of other global regions to account for about 60% of global online retail sales.
Indeed, the digital revolution is affecting the region's sectors since it is at the forefront of technology. Asian businesses are already transforming how people live and work by implementing cutting-edge technologies like robotics and artificial intelligence. The "old economy" industry of manufacturing, which is connected to physical factories, is utilizing industrial robots. Asia employs more industrial robots than any other part of the world.
Regionalization and localization are changing the investment landscape
Big international corporations have spread possibilities across Asian markets by diversifying their manufacturing bases to handle supply chain disruptions. More foreign direct investments are flowing into the industrial sector in Vietnam, Indonesia, and India. In the long run, experts believe that a more regional approach to trade will be driven by ongoing geopolitical uncertainties. Trade within Asia, which currently accounts for most of the continent's imports and exports, is growing faster.
Simultaneously, "localization" is becoming a popular concept in China, as local firms operating in the fast-food and clothing industries, as well as foreign brands purchased by local players, are gaining market share.
In the technology sector, as the start-up ecosystem in Asia grows, new competitors enter the market while top index participants like Samsung, TSMC, Alibaba, Tencent, and Infosys maintain their global market dominance. Indonesia is a Southeast Asian startup hub, while India currently has the third-largest startup environment globally. Beyond the major index constituents, investors may find possibilities in the region's tech innovation and growth.
What are the main Asian Markets?
Although the U.S. still has the largest exchange in the world, many of the largest exchanges now reside in Asia, which continues to grow in influence on the world stage. Japan, Hong Kong and Singapore are (arguably) the most developed and investor-friendly among Asian markets.
Below is an overview of some of the largest Asian stock exchanges in the world:
The Tokyo Stock Exchange
The Tokyo Stock Exchange (TSE) is the largest exchange in Japan and number two behind the NYSE in terms of market capitalization the companies on its exchange (more than $3 trillion). Around 2,000 businesses are listed, and its growth is partially due to a stronger national currency. The exchange partners with other exchanges worldwide, including the London Stock Exchange, and it is considered to have opened for business in 1878.
The Shanghai Stock Exchange
The Shanghai Stock Exchange is one of the newest in the world. It opened in late 1990, and 1,500 companies trade on its exchange. Trading volume continues to increase but has fallen dramatically since 2008, which marked a peak in terms of investment interest in China. A major restriction is that "A" shares of Chinese companies are only available to citizens living in China.
The Hong Kong Stock Exchange
The Hong Kong Stock Exchange is one of the top 10 largest global stock exchanges and the second largest Asian markets. The firms that are listed on the HKSE represent close to $2 trillion in total market capitalization. Around 1,500 companies are listed on the exchange, which dates to just prior to 1900 when it first started operating.
Bombay Stock Exchange (BSE)
The Bombay Stock Exchange (BSE) is Asia's first stock exchange and was established in 1875 as the Native Share and Stockbrokers' Association. The BSE lists close to 6,000 companies and has a major role in the development of India's capital markets, including the retail debt market. BSE has helped grow the Indian corporate sector.
Can Foreigners Invest in the Asian markets?
Retail investors who do not live in Asia can buy common shares of Asian companies directly by registering with a local authorized broker. Many well-established brokerage firms have operations in Asia and can facilitate the process of opening an investment account to trade Asian securities. Opening a bank account in an Asian country is not required. However, investors should be aware that funding an Asian brokerage account with money that comes from overseas can be costly.
In recent years, the governments have sought to make it easier for foreign investors to invest in Asian markets. It's still a tricky process, though, and there are options to avoid exposure to Asian regulations, restrictions, and risks. As expected, some options are much better than others, and some options should be avoided altogether or left to the most sophisticated investors.
How to gain exposure to Asian markets
There are at least three direct ways a foreigner can get exposure to the Asian markets:
Indexes of Asian stock markets. The most widely quoted Asia stock indexes in the international financial media are probably Nikkei and Hang Seng Index, which tracks the Japanese and the Hong Kong Stock Market. Asian stocks listed on the US and European Exchanges. These are shares of foreign stocks offered in foreign markets that are comprehensively known as American depositary receipts (ADRs) and Global depositary receipts (GDRs).
Exchange-traded funds (ETFs) that focus on Asian stocks. There are many to choose from, from the largest providers like iShares, Vanguard, and State Street SPDR. US companies with the highest revenue exposure to Asia. Many All-American stocks rely on revenue from Asian consumers, as the Asian markets has increasingly been a source of profit for them. Currencies. On the exchange market too, some Asian currencies are the subject of growing interest, with Yuan becoming the 5th most traded currency lately.
Anyone looking to invest directly in companies might consider focusing on blue-chip Asian stocks. These companies are readily established, and they have deep financial operations and a bigger shareholder base, thus offering investors greater safety in a region still characterized by uncertainty. Many of them are listed directly on U.S., UK, and EU-based exchanges via American Depositary Shares (ADS) and Global Depositary Receipts (GDRs), making it more accessible for retail investors to get exposure to Asian markets.
ADRs are denominated in dollars and subject to the regulations of the U.S. Securities and Exchange Commission (SEC). Likewise, global depositary receipts are listed on European stock exchanges. However, for example, many promising Indian firms are not yet using ADRs or GDRs to access offshore investors.
Many years ago, these companies were market darlings. In recent years, however, Chinese stocks have come under intense scrutiny due to the inability of investors to trust their financial statements. Unable to regain investor confidence, their share prices decreased significantly, unlike the US stocks and EU stocks that saw a solid uptrend driven by Artificial Intelligence and specifically, Generative AI.
Those interested in short to medium-term speculation on Asian markets via day trading or swing trading should look to stock market indices in Asia (see next section). They can only be traded through CFDs.
Investors interested in owning Asian stocks should look to index funds tracking Asian stocks or professionally managed funds that focus on Asian markets. Many asset managers that offer Asian-focused funds have analysts in Asia who visit and vet companies before investing in them. Many of these funds also hedge their yuan (or renminbi), Indian rupee, or Japanese yen exposure back to the U.S. dollar, reducing another source of risk.
Many investors may be interested in sticking with what they know—U.S., and European companies growing business in Asia. They can offer the best of both worlds: the advantage of strong regulations with the profit growth potential coming from Asia.
Top Stock Market Indices in Asia
One of the simplest ways to gain access to the Asian markets is through stock market indices. A stock index represents the value of a group of stocks from one country's stock exchange. Charles Dow created the first stock index in May 1896 called the Dow Jones Index (DJI). Instead of following all the individual stocks in a country, traders and investors can track the performance of a basket of stocks instead. Asian stock markets also have Asia stock indices which can give a quick snapshot of what is happening in that stock market. A list of Asian stock market indices includes:
The China A50 Index
The China A50 Index is also known as the FTSE China A50 Index as it is operated by the UK FTSE Group. The Shanghai Stock Exchange and the Shenzhen Stock Exchange, both in China, are home to the 50 largest A share businesses, whose values are represented by the index. Some of the biggest corporations in the world, like the Bank of China, PetroChina, and the Shanghai Pudong Development Bank, are included in this Asian stock index.
The Nikkei 225 Index
A price-weighted average of the 225 highly regarded Japanese firms listed in the Tokyo Stock Exchange's First Section makes up the Nikkei-225 Index. Unlike other indexes that incorporate a company's market capitalization for index inclusion, the index was first released in May 1949. Companies including Nissan, Sony, and Toyota are included in probably the most famous Asian stock index.
The Hang Seng Index
The Hang Seng Index is a free-float, capitalisation-weighted index of 50 of the largest companies from the Hong Kong Stock Exchange. The companies in the index are divided into four sub-indices which include: Commerce and Industry, Finance, Properties and Utilities. Some of the companies that make up this top Asian stock index include Hang Seng Bank Ltd, Sands China Ltd and China Mobile Ltd.
The India 50 Index
Also known as the NIFTY 50 (National Index Fifty), the India 50 Index is the flagship index on the NSE (National Stock Exchange of India). The Asian stock index tracks the behaviour of 50 blue-chip companies which are the largest and most liquid Indian securities that are domiciled in India and listed on the exchange. The index includes companies such as ICICI Bank, Reliance Industries and Tata Steel.
The Taiwan 50 Index
The Taiwan Stock Exchange and the FTSE Group worked together to create the Taiwan 50 Index, which measures the performance of 50 firms listed on the Taiwan Stock Exchange. It is also known as the FTSE TWSE Taiwan Index Series at times. Businesses like MediaTek, Chunghwa Telecom, and Taiwan Semiconductor Manufacturing (TSCM) are among them.
The Singapore Free Index
Often referred to as the Singapore 25 Index, it monitors the performance of the 25 biggest firms listed on the Singapore Exchange. The Morgan Stanley Capital International index portfolio is widely recognised globally and is consistently monitored by financial institutions and hedge funds. DBS Group Holdings, OCBC Bank, and Singapore Airlines are included in this Asian index.
Top Asian Stocks by Market Cap December 2023
The Asian growth spurt is helped by the fact that the continent is significantly larger in terms of area than Europe, and its working-age population has grown at some of the fastest rates in the world. Asia also covers 45 million square kilometers in area, which is more than twice the area of Europe and the U.S. combined.
Therefore, some of the world's biggest industries such as construction and air travel are predicted to see faster growth in Asia than in either North America or Europe. Starting from real estate, which is expected to be worth over $40 trillion by 2030, to construction and air travel which are predicted to see faster growth in Asia than in either North America or Europe.
Worth mentioning the industrial growth that often drives entire industries such as metals and minerals. With Asia remaining as diverse as ever, we look at some top Asian stocks to consider based on their market cap, available with a CAPEX.com trade or invest account. The top three stocks in this list are TSMC, Tencent and Samsung.
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) - 476B
Founded in 1987 as a joint venture of Philips, the government of Taiwan, and private investors, TSMC is the world's largest dedicated chip foundry and one of the most traded stocks in the Asian markets. It went public as an ADR in the U.S. in 1997. Even in the very competitive foundry industry, TSMC can produce strong operating margins thanks to its size and superior technology. Moreover, TSMC has benefited from the move to a fabless business model. With a distinguished clientele that includes Nvidia and Apple, the leading foundry seeks to incorporate state-of-the-art manufacturing technology into its semiconductor designs.
The 8 analysts offering 12-month price forecasts for Taiwan Semiconductor Manufacturing Co Ltd have a median target of 114.00, with a high estimate of 130.00 and a low estimate of 75.00. The median estimate represents a +24.18% increase from the opening prices of December 2023, which makes TSMC one of the best Asian stocks for 2023.
Tencent Music Entertainment Group (TCEHY) - 370B
Tencent Music Entertainment Group (TME) is another popular way to access the Asian markets. Headquartered in Shenzhen, China, it operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services for the Chinese market. The Value-Added Services business unit is engaged in apps for several Internet and mobile platforms, community value-added services, and online and mobile gaming. Fintech and cloud services, such as wealth management and commissions on payments, are offered by the FinTech and Business Services segment. Display-based and performance-based ads are included in the online advertising sector.
The 50 analysts offering 12-month price forecasts for Tencent Holdings Ltd have a median target of 55.75, with a high estimate of 63.94 and a low estimate of 37.07. The median estimate represents a +42.37% increase from the opening prices of December 2023. The current consensus makes TCEHY one of the top Asian stocks for 2023.
Samsung Electronics Co Ltd (UNCH) - 360B
Samsung is one of the ambassadors of the Asian stock markets in the last two decades. The primary business activities of the Korean firm Samsung Electronics Co Ltd, are the production and marketing of electronic goods. The Company has four business segments to run its operations. The Information Technology & Mobile Communications (IM) business unit produces digital cameras, network systems, handheld phones (HHPs), laptops, and other devices. The company distributes its goods both domestically and internationally.
The 38 analysts offering 12-month price forecasts for this top Asian stock have a median target of 91, with a high estimate of 115 and a low estimate of 75. The median estimate represents a +28% increase from the opening prices of December 2023. The current consensus makes TCEHY one of the top Asian stocks for 2023.
Toyota Motor Corp (TM) - 250B
Toyota Motor Corp is a Japan-based company engaged in the automobile business, finance business, and other businesses. There are three business segments within the leading automotive company in the Asian markets. The design, production, and retail of sedans, minivans, 2box, sport utility vehicles, trucks, and other related automobiles, as well as related items and parts, are the activities of the automobile segment. Additionally, the company sells electric cars and cars with the innovative Advanced Drive feature of driver assistance technology. The Other segment is engaged in the design, manufacture, and sale of houses, as well as conducting information communication business. The finance segment oversees lending money and leasing cars.
The 19 analysts offering 12-month price forecasts for Toyota Motor Corp have a median target of 205.33, with a high estimate of 231.82 and a low estimate of 152.85. The median estimate represents a +8.31% increase from the opening prices of December 2023. Although Toyota might not look like one of the best Asian stocks according to its price forecast, the company also pays a dividend of $2.23 per share or an annual dividend yield of 2.17%.
Alibaba (BABA) - 220B
Alibaba Group Holding Limited (BABA), the Chinese e-commerce and technology conglomerate, was included in the best Chinese stocks and is one of the best stocks to buy today. The company has been heavily impacted by the continued COVID-19 lockdowns throughout China and the aggressive rate increases and a deteriorating outlook for China’s economy have weighed heavily on the stock. The share price has also been under pressure due to the U.S. Securities and Exchange Commission’s plans to delist Chinese tech stocks in 2024 if they do not provide access to audit files.
The 48 analysts offering 12-month price forecasts for Alibaba Group Holding Ltd have a median target of 138.74, with a high estimate of 187.43 and a low estimate of 78.91. The median estimate represents a +62.66% increase from the opening prices of December 2023, one of the most bullish stock predictions among Asian markets.
Industrial and Commercial Bank of China Ltd (1398) - 215B
ICBC, together with its subsidiaries, provides banking products and services in the People's Republic of China and internationally. The company operates through Corporate Banking, Personal Banking, and Treasury Operations segments. It also offers e-banking services, investment banking, financial leasing, and insurance services. Industrial and Commercial Bank of China Limited was incorporated in 1984 and is based in Beijing, the People's Republic of China.
The 3 analysts offering 12-month price forecasts for this top company in the Asian markets have a median target of 16.16, with a high estimate of 16.76 and a low estimate of 14.44. The median estimate represents a +65.93% increase from the opening prices of December 2023 and makes ICBC one of the most attractive Asian stocks today.
Reliance (RELI) - 190B
Reliance Industries Limited is an Indian company engaged in hydrocarbon exploration and production, oil and chemicals, textile, retail, digital, material and composites, renewables, and financial services businesses worldwide. The company produces and markets petroleum products, such as liquefied petroleum gas, propylene, naphtha, gasoline, jet/aviation turbine fuel, kerosene oil, diesel, Sulphur, and petroleum coke. It also provides petrochemicals.
The 36 analysts offering 12-month price forecasts for this Asian stock have a median target of 2,775, with a high estimate of 3,330 and a low estimate of 2,100. The median estimate represents a +20% increase from the opening prices of December 2023 and makes RELI one of the most attractive Asian stocks today.
HDFC Bank Ltd (HDFCBANK)- 145B
HDFC Bank Limited is an Indian banking and financial services company headquartered in Mumbai. It is India's largest private sector bank by assets and the world's fifth largest bank by market capitalization as of Q3 2023, following its takeover of parent company HDFC. A wide range of goods and services are offered by this leading Asian bank, such as credit cards, consumer durable loans, loans against property, retail and wholesale banking, treasury, auto and two-wheeler loans, personal loans, and loans against property.
The 42 analysts offering 12-month price forecasts for this top Asian stock have a median target of 70.25, with a high estimate of 79.61 and a low estimate of 58.36. The median estimate represents a +21.31% increase from the opening prices of December 2023.
Sony Group Corp. – 110B
Headquartered in Tokyo, Japan, and founded by Akio Morita and Masaru Ibuka on May 7, 1946, Sony is one of the most well-known names in the Asian markets. It engages in the development, design, manufacture, and sale of electronic equipment, instruments, devices, game consoles, and software for consumers, professionals, and industrial markets. Sony operates through the following segments: Game and Network Services, Music, Pictures, Home Entertainment and Sound, Imaging Products and Solutions, Mobile Communications, Semiconductors, Financial Services, and Others.
The 23 analysts offering 12-month price forecasts for this top Asian stock have a median target of 111.54, with a high estimate of 135.58 and a low estimate of 68.67. The median estimate represents a +28.87% increase from the opening prices of December 2023.
AIA – 100B
AIA Group Ltd is an investment holding firm that offers life insurance. Hong Kong, Thailand, Singapore, Malaysia, Mainland China, Other Asian Markets, and the Group Corporate Centre are the geographical segments through which it operates. Australia and New Zealand are also among the international markets where AIA operates. The Group Corporate Centre segment consists of company functions, shared services, and eliminations of intragroup transactions. Cornelius Vander Starr established the business in 1919, and its main office is in Hong Kong.
The 22 analysts offering 12-month price forecasts for this top Asian stock have a median target of 48.62, with a high estimate of 74.06 and a low estimate of 44.44. The median estimate represents a +32.89% increase from the opening prices of December 2023.
The Asian stocks highlighted on this list are sourced from industry analysts, but they may not be a perfect fit for your portfolio. Before you decide to purchase any of these Asian stocks listed in alphabetical order, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
Top Asian ETFs
The Asian markets are a hotbed of business activity, bringing together a wide range of countries at different stages in their economic development. Japan stands as the elder statesman of the region, while China has brashly taken over the role as the largest economy there, while the structural changes to the Indian economy such as the growth in the amount of digitization will ensure that the country is one of the strongest contenders for investment in the developing and emerging markets sector.
With many different nations involved, using an exchange-traded fund (ETF) to get measured exposure to Asian stock markets is attractive to many investors. The following five Asia ETFs show the diversity in the region and the need to look carefully at investment opportunities before making a final decision.
iShares China Large-Cap ETF (FXI)
The iShares China Large-Cap ETF seeks to track the investment results of an index composed of large-capitalization Chinese equities that trade on the Hong Kong Stock Exchange. The top 3 holdings of this ETF providing regional exposure to the Asian markets are Tencent, Alibaba and Meituan with over 8%. The expense ratio is 0.74%.
iShares Taiwan Index ETF (FXI)
The iShares MSCI Taiwan ETF seeks to track the investment results of an index composed of Taiwanese equities and provide exposure to large and mid-sized companies in this fast-growing Asian market. The top holding is TSMC with a weight of 22.74%.
Direxion Daily India Bull 3X Shares ETF
The INDL Exchange Traded Fund (ETF) is provided by Direxion and is built to track the MSCI Emerging Markets India Index. This ETF provides a synthetic exposure to the fastest-growing Asian market and seeks daily investment results, before fees and expenses, of 300% of the performance of the MSCI India Index.
iShares South Korea Index ETF (FXI)
The iShares MSCI South Korea ETF seeks to track the investment results of an index composed of South Korean equities, one of the leading Asian stock markets. The top holding is Samsung Electronics with a weight of 24.5%.
Vanguard FTSE Emerging Markets ETF
VWO exchange-traded-fund invests in stocks of companies located in emerging markets around the world, including leading Asian markets such as China and Taiwan. The goal is to closely track the return of the FTSE Emerging Markets All Cap China A Inclusion Index.
The Asian ETFs highlighted on this list are sourced from industry analysts, but they may not be a perfect fit for your portfolio. Before you decide to purchase any of these Asian ETFs listed in alphabetical order, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
Top Companies with Highest Revenue Exposure to Asia
Contrary to the popular perception, Apple (AAPL) generates below 25% of its revenue from the Asian markets, with 15% from Greater China, 5% from Japan, and around 6% from the rest of Asia Pacific, according to statista.com. Boeing (BA), Caterpillar (CAT), General Motors (GM), Starbucks (SBUX), Nike (NKE), and Ford (F) are some other US companies with a strong presence in the country. But none of them get more than a third of their revenue from China.
Wynn Resorts (WYNN)
Wynn Resorts (WYNN), which runs three casinos in Macau, is at the top of the companies with the highest revenues from the Asian markets. Additionally, it owns two casinos: one in Everett, Massachusetts, and another in Las Vegas. 75.2% of Wynn Resorts' revenue comes from its casinos in Macau. Approximately 77.1% of Tijori Finance's operating income comes from its Macau business.
Qualcomm (QCOM), a massive semiconductor company, comes closely following with over 70% of revenues coming from the fast-growing Asian markets. The factories that manufacture smartphones and other gadgets receive a sizable portion of Qualcomm's shipments. Some of the biggest smartphone vendors in the world, such as Xiaomi, OnePlus, Oppo, Vivo, Lenovo, and others, are based in China, and most of their products incorporate Qualcomm CPUs.
Micron Technology (MU)
Third place goes to Micron Technology (MU), which has over two-thirds of its revenue coming from Asian markets. In contrast, just 11.9% of its revenue comes from the US. It is one of the top producers of computer data storage products worldwide, including NAND flash memory and USB flash drives.
Rio Tinto Group
Rio Tinto Group, a multinational exploration, development, production, and processing corporation headquartered in London, UK, generates over two-thirds of its sales revenues from Asian markets. The United States, the company's second-largest market in terms of revenue, accounted for 12.6 of revenue generation.
Luxury powerhouse LVMH saw its Revenue in Asia, excluding Japan, up over 20% in the first quarters of 2023, compared to the same period a year ago, as the Asian markets continue to be lucrative for the $500 billion company.
Top Asian Currencies
The Asian forex market is a vibrant tapestry of financial activities, featuring a plethora of currencies, trading sessions, and regulatory frameworks. Before immersing yourself in online trading, it’s vital to grasp the distinctive dynamics of the forex market.
Upon the elimination of the European currencies, currency market players quickly turned their attention elsewhere. Emerging markets in Asia were almost instantly perceived as fertile ground for currency trading. But that raises the question, which Asian currencies are the most closely followed by the forex market?
Japanese yen (JPY)
With an average daily volume of US$554 billion, the Japanese yen is the third most traded currency in the world and the national currency of Japan. With an estimated 4.9% of all currency reserves worldwide, it is also the third-largest reserve currency. The Bank of Japan is the one issuing it (BoJ).
The health of Japan's economy, especially its manufacturing sector, which oversees major exports including automobiles, electronics, machine tools, ships, and textiles, has a significant impact on the value of the yen. Many forex traders pay attention to economic releases since the demand for these products typically results in an increase in the value of the yen. The announcement of the BoJ meeting, GDP figures, the industrial output index, the Tankan survey, and unemployment figures are a few examples of events to watch during the Asian market session.
Chinese renminbi (CNH)
With an average daily volume of US$142 billion, the Chinese renminbi, sometimes known as the "yuan" in colloquial language, is the eighth most traded currency in the world and the official currency of the People's Republic of China. Lately, the CNH jumped to fifth place in currency transactions, as the country's economic expansion increased, and sanctions hit Russia. That is a phenomenal rise from its 35th place in 2001.
Many economists believe China has benefitted from a weak renminbi, which has made its exports more competitive over the last few decades and enabled it to maintain a trade surplus with many other countries, and is therefore skeptical of its claims to be targeting a free-floating renminbi. As China is a major exporter of commodities and manufactured goods, the value of the renminbi depends heavily on the country’s terms of trade, particularly with major trading partners such as the US and Europe.
Markets to watch: USD/CNH
Indian rupee (INR)
The Indian rupee is the official currency of the Republic of India. With an average daily volume of $113 billion in 2019, it is the 16th most traded currency internationally, according to the most recent BIS foreign exchange turnover data. India's GDP grew at one of the quickest rates in the world between 1998 and 2017, averaging 7.1% annually. Currently ranked sixth in terms of GDP, its nominal GDP is projected to reach $3.05 trillion in 2021.
Officially, there is a market-determined (floating) exchange rate for the rupee. To exert some influence over the exchange rate, however, the nation's reserve bank engages in active trading in the USD/INR market. As a result, the USD/INR is effectively a "managed float." Because the exchange rates for the other rupees are not controlled, currency arbitrage happens frequently. Nonetheless, the goal of the intervention is to lessen volatility rather than change the pace or direction of market moves.
Markets to watch: USD/INR
Remember that there are various factors that affect the price of a currency pair. So, you should always perform technical analysis and fundamental analysis before you decide to trade. Consider political and economic events, and study key price levels to form a basis for your forex positions.
Trade and Invest in the Asian Markets
Investing and trading are both ways to get exposure to the Asia stock markets. Even though both offer the potential to profit from the financial markets, they differ fundamentally.
Invest in Asian stocks & ETFs
Investing means that you will own the physical shares of stocks and funds until you decide to sell them. When investing, you need to commit to the full value of the investment upfront. If your shares are worth more when you sell them than when you bought them, you’ll make a profit. But, if the price has declined, you’ll incur a loss. While the potential for profit is technically unlimited, your losses are capped at your full initial outlay.
You might want to invest in Asian stocks if:
- You’re interested in buying and selling assets (stocks and ETFs)
- You’re focused on longer-term growth
- You want to build a diversified portfolio
- You want to take ownership of the underlying asset
- You want to gain voting rights and dividends (if paid)
CAPEX.com offers +5.000 stocks and ETFs with ownership, including Asian stocks listed on NYSE, NASDAQ, and Hong Kong stock exchanges.
Trade Asian Indices, Stocks, ETFs and Currencies
Trading, on the other hand, enables you to predict share price movements without owning the underlying asset – and you can go long or short. This means that you can speculate on rising as well as falling prices. You also don’t need all the capital upfront, as you’ll trade using leverage. All you need to open a position is a small deposit called a margin. Keep in mind that leverage magnifies both potential profits and possible losses. This makes it vital that you manage your risk properly.
Do you want to practice trading? Open a CAPEX.com demo account to trade in a risk-free environment.
You might want to trade the Asian stock markets if:
- You are interested in speculating on the underlying price of the assets (stocks, indexes, ETFs, commodities, bonds, currencies, cryptocurrencies)
- You want to trade rising and falling markets – going long and short
- You want to leverage your exposure
- You want to take shorter-term positions
- You want to hedge your portfolio
- You want to trade without owning the underlying asset
CAPEX.com offers +2.000 CFDs on stocks, indexes, commodities, ETFs, bonds, forex and cryptocurrencies.
Final words about Asian markets
Asian markets are fast becoming engines for future growth. Currently, only a very low percentage of the household savings of Asians are invested in the domestic stock market, but with gross domestic product (GDP) growing annually (not counting the pandemic), and a stable financial market, we might see more money joining the race.
There are several ways for investors to gain exposure to Asian markets. You can choose from a slew of Asian stocks or, for those wanting broader exposure and following a lower-risk strategy, several exchange-traded funds (ETFs). You can also trade the most liquid Asian stock indexes and currencies.
Once you’re ready, you can get started with CAPEX.com. Invest in Asian stocks or ETFs from as little as $100 or trade them with derivatives like CFDs to utilize leverage.
Before you start investing and trading in the Asian markets, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading and investing courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you become a better trader or make more informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for stock investors who are looking to make a transition to leveraged trading.