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Topic: ETFs

Global ETFs hold quality stocks from two strong economies

Global stock markets were strong in 2017 and continued to perform well up to the recent stock market decline.

Exchange-traded funds (ETFs) that track overseas markets give Canadians a good way to diversify their portfolios beyond North America. These two low-fee ETFs hold high-quality stocks from two well-established economies, one in Europe and one on the Pacific Rim.


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ISHARES MSCI GERMANY FUND (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index. These holdings aim to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable to international investors, partly due to limitations on foreign ownership.

The ETF’s top stocks are SAP (software), 7.8%; Allianz (insurance), 7.4%; Bayer (diversified chemicals), 7.3%; Siemens (engineering conglomerate), 7.2%; BASF (chemicals), 7.2%; Daimler (automobiles), 5.5%; Deutsche Telekom, 4.0%; Deutsche Post, 3.0%; Linde AG (industrial gases), 2.9%; and Adidas AG, 2.8%.

The ETF began trading March 1996. Its MER is 0.48%. The fund yields 2.1%.

Strong global demand continues to boost Germany’s export- oriented economy. As well, domestic demand is high, led by a rise in retail sales and industrial production.

This has offset concerns about whether Chancellor Angela Merkel will be able to govern effectively with her new coalition government. It has also eased worries about the 2016 Brexit decision by the U.K. (Germany’s fifth-largest trading partner) and uncertainty surrounding U.S. President Donald Trump’s future trade policies.

Recommendation in Canadian Wealth Advisor: iShares MSCI Germany Fund is a buy.

ETFs: Rising commodity prices boost this economy

ISHARES MSCI AUSTRALIA ETF (New York symbol EWA; buy or sell through brokers) is an ETF that holds 71 major Australian stocks.

The fund’s top holdings are Commonwealth Bank of Australia, 10.6%; Westpac Banking, 8.0%; BHP Billiton, 6.7%; Australia and New Zealand Banking, 6.5%; National Australia Bank, 6.0%; CSL, 5.0%; Wesfarmers, 3.7%; Woolworths, 2.5%; Macquarie, 2.4%; and Rio Tinto, 2.3%.

By industry, the ETF is Financials, 41.3%; Mining, 16.9%; Real Estate, 8.4%; Consumer Staples, 7.4%; Health Care, 7.3%; Industrials, 5.6%; Energy, 5.2%; Consumer Discretionary, 2.7%; Utilities, 2.2%; and Telecom, 1.3%.

The iShares MSCI Australia ETF started up March 12, 1996. The fund has a 0.48% expense ratio. The fund yields 4.7%.

Australia benefits from its stable banking and political systems. It is also rich in natural resources, and rising commodity prices have boosted the national economy. In addition, the country’s proximity to Asian markets, including India and China, gives it strong long-term prospects.

Recommendation in Canadian Wealth Advisor: MSCI Australia ETF is a buy.

For our views on how to make the best use of ETFs in your investment portfolio, read Stock Investment Strategies: ETFs, Diversification, and Compound Interest

For our recent report on ETFs that could be your best way to hold precious metals, read Two ETFs hold top gold and silver miners.

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