Due to the recent decline in position against other major currencies, many market participants have wondered: Is now a good time to invest in European equities?
The dollar lost about 5% of its value against the US and about 6% against the July one. While broader US indices are likely to continue to offer many robust stocks, long-term investors may consider diversifying with incumbent stocks listed in the UK and continental Europe.
Below are two exchange traded funds to consider:
1. iShares MSCI UK ETF
Current price: $ 26.40
52-week range: $ 19.51 – 34.31
Dividend Yield: 3.88%
Dividend distribution frequency: every six months
Expense Ratio: 0.50% per year, or $ 50 on an investment of $ 10,000
The iShares MSCI United Kingdom ETF (NYSE 🙂 which currently has 88 holdings, follows the index.
First, we provide some background information on the UK stock markets. London is a hub of international financial markets and the London Stock Exchange (LSE) is the main stock exchange in the UK and the largest in Europe.
Financial Times and the London Stock Exchange jointly own the FTSE Group, an independent organization that has several stock indexes covering not only the UK but other world markets as well .
The most famous index in the UK, the was launched in 1984 and consists mainly of multinational conglomerates, which many international investors are said to be familiar with.
The index was launched in 1992 and includes the 101st to the 350th largest listed companies on the LSE. Since stocks listed on the FTSE 250 tend to have a domestic focus, they are more directly impacted by shorter term developments in the UK economy.
Although most companies in the EWU are members of the FTSE 100 index, several originate from the FTSE 250. The main sectors (by weight) include consumer goods (19.91%), financial services (16 , 90%), healthcare (14.34%). %), Industry (10.66%) and Materials (10.47%). These five sectors make up approximately 72% of the fund.
The top ten stocks make up 45% of total net assets, which is approximately $ 2.1 billion. EWU's top five companies are AstraZeneca (NYSE :), GlaxoSmithKline (NYSE :), HSBC Holdings (NYSE :), Diageo (NYSE 🙂 and British American Tobacco (LON 🙂 (NYSE: NYSE :).
The fund has declined by approximately 24% to date. In March, however, it hit a 52-week low of $ 19.51, so $ 1,000 invested in EWU would now be worth over $ 1,300.
Although the UK left the European Union on January 31, 2020, the Brexit transition period will not end until December 31, 2020. During this transition period, the UK and EU are negotiating a trade deal, so investors are expected to be based in the UK share hunger as the year approaches.
2. SPDR EURO STOXX 50 ETF
Current price: $ 37.32
52-week range: $ 24.29 – 41.27
Return on Fund Dividend: 1.65%
Dividend distribution frequency: quarterly
Gross expense ratio: 0.29% per year, or $ 29 on an $ 10,000 investment
The SPDR® EURO STOXX 50 ETF (NYSE 🙂 with 50 holdings tracks the Index. The main sectors (by weight) are financial services (14.08%), information technology (13.76%), consumer goods (13.66%), industry (12.42%) and materials (10.81%). These five sectors make up 65% of the fund.
Total net worth is approximately $ 1.7 billion and the top ten holdings make up 42% of the fund. FEZ's top five companies are SAP (NYSE :), ASML Holding (NASDAQ :), Linde (NYSE :), Sanofi (NASDAQ :), and LVMH Moet Hennessy Louis Vuitton ( OTC :).
Finally, in terms of geographic breakdown, EU members France, Germany and the Netherlands have the highest contribution, almost 80% in total.
So far in the year, the fund has fallen by nearly 9%. However, it has risen more than 50% from its March low. Economic data from Europe in recent weeks has not been much to write home about. However, the European Central Bank has announced a large stimulus package that is likely to support the economy and share prices of solid European companies.
The Bottom Line
ETFs make it easy to invest in European markets without having to select companies individually. Both EWU and FEZ have relatively low cost ratios and are supported by robust economies. As such, long-term investors may want to keep European funds on their radar.
