Posted on 17 August 2011.
Since Asia has the fastest growing economies in the world, Asian Stock Markets have garnered a lot of interest from investors worldwide who are looking for high rates of return on their equity investments. While Asian Stock Markets do not trade entirely in tandem with their underlying high growth economies, and often react to stock market moves in other regions of the world such as North America and Europe, investors are eager to buy stocks in the fastest growing region of the world to take advantage of the faster growth rates and the potential for significant stock market appreciation.
Asian economies are mix of developed economics such as Japan and developing economies such as China. While some of the Asian Stock Markets in developed economies such as Japan have lagged over the past couple of decades, as growth has been slow, other economies and stock markets in the region have experienced explosive growth and similarly explosive stock market gains. There is no reason to believe that the explosive growth occurring in developing economies in Asia is going to end soon, since the populations in these countries are growing and they are demanding products and services associated with a higher standard of living, which causes explosive economic growth and stock market gains.
There are many ways for investors in the United States to invest in Asian Stock Markets. An investor can buy many well known Asian companies such as China Mobile, Sony, and Honda on stock exchanges in the United States via American Depository Receipts (ADRs) shares that are based on the valuation of a company’s shares that are traded in their home country in Asia. To target a specific Asian country or industrial sector or entire Asian Stock Markets, an investor can buy exchange-traded funds (ETFs) that focus on segments of Asia Stock Markets. More sophisticated investors can open trading accounts that allow them to buy Asian shares directly, but this is not recommended for the average investor since securities laws and standards are different in Asian countries than the United States, and to make sound investment decisions one needs to be aware of these differences and associated risks.
While Asian Stock Markets are susceptible to the same business cycles and advances and declines as domestic stock markets, it is not unreasonable to expect higher rates of returns from investments in stocks that trade in Asia over long periods of time, since the growth rate in the Asian region is much higher than the United States.
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