iShares MSCI All Country Asia ex Japan ETF (AAXJ)
Are Asian ETFs in Jeopardy Amid the War & Tariff Double Whammy?
Asian ETFs are under pressure as surging oil prices and new U.S. tariffs trigger market turmoil and sharp fund outflows across the region.
Why AAXJ Is A Better ETF Than AIA
The iShares MSCI All Country Asia ex Japan ETF offers superior diversification across Asia ex Japan, with 915 holdings and meaningful exposure to India and Southeast Asia. The iShares Asia 50 ETF is highly concentrated, with 51% in four tech stocks, exposing investors to significant concentration and the "AI trade" risk. AAXJ's broader sector and geographic mix, including India's growth, justify its slightly higher 0.72% expense ratio and 20x P/E.
AAXJ: Ambivalent Outlook
The MSCI Asia Ex Japan Index includes two developed and eight emerging Asian markets, aligning closely with the MSCI AC Asia Index over the past decade. This ETF tracks the AC Asia Ex Japan Index invests in over 900 companies, with a management fee, offering broad exposure to Asian markets. Many Japanese equities trade well below book value, presenting potential undervaluation opportunities compared to the MSCI EM Index.
AAXJ: Not For Now, Let The Global Markets Settle
iShares MSCI All Country Asia ex Japan ETF focuses on emerging markets like India, China, and South Korea, excluding Japan due to its developed market status. AAXJ has underperformed long-term, delivering only 16.3% five-year total return, but has recently outperformed the S&P 500. The ETF's top holding, Taiwan Semiconductor, faces risks from geopolitical tensions, while its financials and consumer discretionary sectors have driven recent gains.
The Trump Factor Takes A Toll On Foreign Stocks
The election victory has fueled a strong rally in US equities, but Trump's comeback is seen as a new risk factor elsewhere as Washington prepares to pivot to new edition of an “America First” policy. The latest surge in US shares has widened the lead for SPDR S&P 500 ETF (SPY) year to date.
