Topic: ETFs

Benefit from manufacturing, high tech, finance, and mining

All major global stock markets fell at the initial outbreak of COVID-19 and most subsequently rebounded. We think the outlook remains positive for quality stocks in the right countries, and one way to profit from that—while cutting your risk—is to invest in quality ETFs.

Here’s a look at two international funds we believe are well-suited for your new buying.

ISHARES MSCI GERMANY FUND (New York symbol EWG) tracks the stocks in the MSCI Germany Index. Through its holdings, it aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable to foreign investors; that’s partly due to limitations on foreign ownership.

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Regardless, the ETF offers you exposure to Germany’s top stocks: SAP (software), 9.6% of assets; Siemens (engineering), 7.9%; Allianz (insurance), 6.1%; Daimler AG (automobiles), 5.4%; BASF (chemicals), 4.2%; Adidas AG, 4.0%; Deutsche Telekom, 3.9%; Deutsche Post AG, 3.9%; and Infineon Technologies (computer chips), 3.9%.

The fund began trading in 1996. Investors pay a reasonable 0.51% MER.

The German economy has been slowed by supply chain disruptions due to the pandemic and a shortage of raw materials.

These factors have hurt the country, which relies heavily on the export of industrial products. However, the economy resumed growing at a steady pace in the second half of last year. The gradual lifting of lockdown measures at home and abroad is strengthening both domestic and foreign demand. Meanwhile, the country is dealing with the effects of the Ukraine war and will need to successfully control the course of the pandemic amid continuing uncertainty.

ETFs: Financials and mining are the biggest potential winners here

ISHARES MSCI AUSTRALIA ETF (New York symbol EWA) gives you exposure to 65 of Australia’s major stocks.

The ETF’s top holdings are Commonwealth Bank of Australia at 11.5% of assets; CSL Ltd. (biotechnology), 8.4%; BHP Group (mining), 6.7%; National Australia Bank, 5.8%; Westpac Banking, 5.8%; Australia and New Zealand Banking, 4.9%; Macquarie Group (financial services), 4.2%; and Wesfarmers (conglomerate), 4.0%.

By industry, the fund’s holdings break down as Financials, 36.8%; Mining, 15.9%; Health Care, 11.3%; Consumer Discretionary, 7.2%; Real Estate, 6.8%; Consumer Staples, 5.5%; Industrials, 5.1%; Information Technology, 4.0%; Energy, 3.6%; Telecom, 2.2%; and Utilities, 1.7%.

The iShares MSCI Australia ETF started up March 12, 1996, and investors pay a reasonable 0.51% MER.

To counteract the economic effects of COVID-19, Australia’s government and central bank jointly delivered emergency measures. This included major stimulus packages. Meanwhile, the central bank has cut rates to all-time lows.

Australia has largely emerged from lockdown and that bodes well for economic activity going forward. Moreover, the government aims to reach a trade deal with the EU by the end of 2022, which would boost the trade sector.

Recommendation in Canadian Wealth Advisor: iShares MSCI Germany Fund & iShares MSCI Australia ETF are buys.


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