Pacific Funds In Focus On Trans Pacific Partnership Deal
After hectic negotiations for half a decade, the contentious Trans Pacific Partnership (TPP) was secured by the U.S. and 11 other countries. This is the biggest trade agreement in history aimed at reducing tariffs and setting common trading standards for the 12 Pacific Rim nations, including the U.S., Canada, Japan, Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement will thus widen the horizons of trade in the Pacific region. TPP will cut tariffs and create common standards for all 12 member countries. On first look, these measures look promising enough to boost the business environment of the Pacific or related countries. For example, the deal will create new opportunities for companies in Pacific regions while providing adequate protection for U.S. manufacturers. While it helps the companies and the stock performances, the funds should look to benefit too. However, the TPP is not without controversies and opposition. US Democratic presidential hopeful Hillary Clinton is against the trade deal and said the proposed pact does not address currency manipulation. The deal puts Pacific funds under the spotlight, which are hoping to rebound from the negative territory. The funds are favorably-ranked but the market concerns this year had dragged them to the red too. Positive impact of the TPP, which will lower trade barriers around the Pacific and boost export-heavy markets, will be a welcome factor for the Pacific mutual funds. A Look into TPP Deal Currently, TPP member nations represent about 40% of global GDP and 30% of global trade. The deal will open up trading avenues for key export products of Vietnam such as textile, garment, footwear, and seafood in broader market such as the U.S., Japan, and Canada due to their ultra low import tariffs. An argument in favor of the TPP deal is that it will expand U.S. exports and create higher-paying jobs. On the other hand though, there may be an outflow of American jobs to overseas economies. There is also uncertainty about why the exact wording of the TPP was kept relatively secret during negotiations. As the TPP reaches the Congress for approval, it will witness apprehensions from both parties. The Congress may thus take months to deliberate. Meanwhile, the public will also get a minimum of two months to review the content of the deal before Congress decides on its approval. Talking of apprehensions, presidential hopeful Hillary Clinton commented: I have been trying to learn as much as I can about the agreement…But I’m worried. I’m worried about currency manipulation not being part of the agreement. We’ve lost American jobs to the manipulations that countries, particularly in Asia, have engaged in. I’m worried the pharmaceutical companies may have gotten more benefits – and patients and consumers fewer. I think there are still a lot of unanswered questions. On a separate note, it was interesting to find out the absence of China. It is a prominent country in the Pacific Rim, but the second largest economy and the world’s largest exporter was not part of the proposed pact. Though some believe that China will join in later, but for now this is an opportunity for others to grab a share of China’s export market. 3 Pacific Mutual Funds to Buy Below we highlight three Pacific – Equity mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). 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. Also, the funds have encouraging 3- and 5-year annualized returns. The minimum initial investment is within $5,000. The Guinness Atkinson Asia Pacific Dividend Builder Fund (MUTF: GAADX ) invests heavily in dividend generating equity securities issued by companies form the Asia Pacific region. Common and preferred stocks, related convertible securities, rights and warrants constitute GAADX’s major investments. Guinness Atkinson Asia Pacific Dividend carries a Zacks Mutual Fund Rank #2. Over 1-year period, GAADX has gained 4.3%. The respective 3- and 5-year annualized returns are 4.9% and 4.1%. GAADX carries no sales load. The Fidelity Pacific Basin Fund (MUTF: FPBFX ) seeks to achieve long-term capital appreciation by investing a major portion of its assets in securities of issuers located or are economically tied to Pacific Basin. FPBFX generally invests in common stocks of companies located across a wide range of Pacific Basin countries. Factors such as financial strength and economic condition are considered before investing in a company. Fidelity Pacific Basin carries a Zacks Mutual Fund Rank #1. Over 1-year period, FPBFX has gained 5.2%. The respective 3- and 5-year annualized returns are 11.3% and 7.6%. FPBFX carries no sales load, and annual expense ratio of 1.18% is lower than the category average of 1.33%. Wells Fargo Advantage Asia Pacific Fund (MUTF: SASPX ) seeks capital growth over the long run. SASPX allocates a lion’s share of its assets in equities of companies located in Asia Pacific Basin. SASPX emphasizes on factors including earnings growth, financial condition and management efficiency for selecting companies. SASPX may also invest in participation notes. Wells Fargo Advantage Asia Pacific Investor carries a Zacks Mutual Fund Rank #2. Over 1-year period, SASPX has gained 3.5%. The respective 3- and 5-year annualized returns are 8% and 5.2%. SASPX carries no sales load. Link to the original post on Zacks.com