North Korea Fear Overblown: 5 Asia Pacific Mutual Fund Picks

Asian stocks gained luster on Sep 11 and 12 after fears over a North Korean missile launch receded and the impact of Hurricane Irma weakened. Key indexes of countries including, Japan, South Korea, China and Australia gained momentum on the first two trading days of this week.

Strong performance of equity markets in the Asia Pacific region bode well for mutual funds with significant exposure to the Asian markets. This is why it makes good sense to invest in five Asia Pacific mutual funds.

North Korea Missile Launch, Irma Fears Ebb

North Korea celebrated its 69th foundation anniversary on Sep 9. However, North Korea’s celebration lacked any missile launch as widely feared. The absence of any new development concerning North Korea subdued tensions in the Korean peninsula. This in turn boosted investor sentiment, which was experienced by major indexes of not just South Korea, but also other Asian countries like China and Japan.

Additionally, after millions of people in Florida lost power and the financial district in downtown Miami witnessed a flood, fears seemed to rise over Hurricane Irma’s future impact. However, despite heading toward the more populated Tampa-St. Petersburg region, the hurricane was downgraded from its previous Category 5 storm level.

The less-than-expected impact of Irma led the U.S. dollar to rebound from its worst level in the last two years. Weakening of the yen against the dollar and the fastest pace of growth in Japan’s core machinery orders since January 2016 pushed the Japanese shares to their best levels in more than five trading days.

Indexes Register Strong Gains

Following gains in Sep 11, all the key indexes maintained their momentum on the next trading day. On Sep 12, Japan’s benchmark index Nikkei 225 climbed 1.2% or 230.85 points to close at 19,776.62. Additionally, the broader Topix index closed 0.9% up at 1,627.45. Additionally, South Korea’s Kospi index rose 0.3% to end at 2,365.47.

Moreover, China’s central bank reportedly decided to eliminate reserve requirements on trading of foreign-exchange forwards, which led the Shanghai Composite index to rise 0.1% to finish at 3,379.488. Also, Hong Kong’s Hang Seng index surged 0.1% to end at 27,972.24. Further, Australia’s benchmark S&P/ASX 200 index advanced 0.6% to 5,746.441.

In the year-to-date (YTD) period, key indexes like Nikkei 225, Kospi, Shanghai Composite, Hang Seng and S&P/ASX 200 rose 3.4%, 16.7%, 8.9%, 27.1% and 1.5%, respectively.

Buy These 5 Asia Pacific Mutual Funds

Investors interested in gaining exposure to the well-diversified and economically vibrant Asia-Pacific region may consider mutual funds that primarily allocate most of their assets in countries within this region.Moreover, strong gains in the key indexes of some major nations put the spotlight on Asia Pacific mutual funds.

This upbeat backdrop calls for investing in five Asia Pacific mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive YTD and one-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Fidelity Japan FJPNX seeks capital appreciation for the long run. FJPNX invests a large part of its assets in securities of Japanese and other companies operating in Japan. The fund uses fundamental analysis while investing in common stocks of Japanese companies.

FJPNX has an annual expense ratio of 0.78%, lower than the category average of 1.30%. The fund has YTD and one-year annualized returns of 19.1% and 17.6%, respectively. FJPNX has a Zacks Mutual Fund Rank #2.

Fidelity Pacific Basin FPBFX invests a major portion of its assets in securities of Pacific Basin issuers and other investments that are tied economically to the Pacific Basin. The fund allocates its assets in several Pacific Basin countries, with significant exposure in Japan and Australasia. FPBFX seeks capital appreciation for the long run.

FPBFX has an annual expense ratio of 1.19%, lower than the category average of 1.48%. The fund has YTD and one-year annualized returns of 27.2% and 20%, respectively. FPBFX has a Zacks Mutual Fund Rank #2.

Matthews Asia Growth Investor MPACX seeks to achieve its investment objective by investing the majority of its assets in preferred and common stocks of companies located in Asia. It may also invest in convertible securities of Asian companies. MPACX seeks capital growth for the long run.

MPACX has an annual expense ratio of 1.14%, lower than the category average of 1.48%. The fund has YTD and one-year annualized returns of 27.7% and 21%, respectively. MPACX has a Zacks Mutual Fund Rank #2.

Fidelity China Region FHKCX seeks appreciation of capital for the long run. FHKCX invests heavily in Chinese, Taiwanese and Hong Kong companies. It uses fundamental analysis of factors like economic and market conditions and industry and financial position.

FHKCX has an annual expense ratio of 1.01%, lower than the category average of 1.33%. The fund has YTD and one-year annualized returns of 38.2% and 27%, respectively. FHKCX has a Zacks Mutual Fund Rank #2.

Matthews Korea Investor MAKOX invests a large chunk of its assets in common and preferred stocks of South Korean companies. MAKOX focuses on mid-to-large-cap firms, but is not restricted to them. The fund seeks capital appreciation for the long run. It is a non-diversified fund.

MAKOX has an annual expense ratio of 1.15%, lower than the category average of 3.63%. The fund has YTD and one-year annualized returns of 27.8% and 17.3%, respectively. MAKOX has a Zacks Mutual Fund Rank #1.

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