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Investors Flocking To Eurozone ETFs As Q1 Draws To A Close
Terror attacks or not, European equity markets continue to march higher in the short-term, and we have seen end-of-the-quarter inflows into the third largest fund in the space, EZU (iShares MSCI Eurozone, Expense Ratio 0.50%, $8.8 billion in AUM).
More than $500 million has entered EZU in recent sessions, and we note that the fund is trading at its highest levels since the early Fall of 2015 this morning, on what has been a five consecutive day winning streak in the fund (if it holds today).
EZU is behind larger funds HEDJ (WisdomTree Europe Hedged Equity, Expense Ratio 0.58%, $9.2 billion in AUM) and VGK (Vanguard FTSE Europe, Expense Ratio 0.10%, $11.3 billion in AUM). EZU contains two hundred fifty individual equity names, and from a country allocation standpoint, France (>32%) carries the highest weighting, followed by Germany (>29%), Spain (>10%), the Netherlands (>8%), Italy (>6%), Belgium (>3%), Finland (>3%) and lesser allocations to Ireland, Austria and Portugal at the moment.
Notably, the United Kingdom is not represented here anymore (previously it had about a 10% allocation), of course because of last year’s “Brexit.” When looking at the sector exposure in terms of what may be powering this fund higher lately we see the largest weighting in Financials (19.45%), Industrials (14.93%), Consumer Discretionary (13.97%), and Consumer Staples (10.53%) with lesser weightings to the other industry sectors.
Large-Caps rule the portfolio, with an 83% allocation, followed by a 14% tilt to Mid-Caps and a small 2% weighting to Small-Cap companies. Top equity holdings within the fund are 1) Total SA (France, 2.96%), 2) Siemens AG (Germany, 2.50%), 3) Sanofi SA (France, 2.43%), 4) Bayer AG (Germany, 2.38%), and 5) SAP SE (Germany, 2.34%).
Given the hefty allocations to France and Germany as we mentioned above, it makes plenty of sense to also closely watch the single country ETFs from these respective countries as they may also catch investment interest on the recent rally. These country-specific funds include the EWQ (iShares MSCI France, Expense Ratio 0.48%, $378 million in AUM) and the considerably larger EWG (iShares MSCI Germany, Expense Ratio 0.48%, $4.4 billion in AUM). EWQ has reeled in $56 million in new inflows year-to-date while EWG has attracted >$205 million in its own right.
The iShares MSCI EMU Index ETF (BATS:EZU) was trading at $37.82 per share on Tuesday morning, up $0.19 (+0.50%). Year-to-date, EZU has gained 9.31%, versus a 4.89% rise in the benchmark S&P 500 index during the same period.
EZU currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 91 ETFs in the European Equities ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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