Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

2 ETFs For Betting On A Rebound In European Stocks

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMar 31, 2022 02:35AM ET
www.investing.com/analysis/2-etfs-for-betting-on-a-rebound-in-european-stocks-200621195
2 ETFs For Betting On A Rebound In European Stocks
By Investing.com (Tezcan Gecgil/Investing.com )   |  Mar 31, 2022 02:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
UL
+0.26%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
RHHBY
+1.13%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NSRGY
-0.01%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DBEU
+0.68%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LVMUY
+0.09%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
VIX
+0.39%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Concerns over high inflation levels and the war in Ukraine have meant increased volatility for stocks on Wall Street and other exchanges around the world.

For instance, the DAX index of blue-chip German companies is down 2.8% for the past year and 8.2% year-to-date (YTD). Many regard the DAX as a proxy of the European Union (EU).

DAX Weekly Chart
DAX Weekly Chart

Meanwhile, the FTSE 100 index, which comprises the 100 largest names listed in the UK, is up 11% in the past 12 months and 2.1% since January 2022. Thus, so-called Footsie shares have recently shown more resilience than their EU counterparts.

FTSE 100 Weekly Chart
FTSE 100 Weekly Chart

Today’s article introduces two exchange-traded funds (ETFs) that deserve the attention of readers who are looking for entry opportunities into robust European stocks. In the case of improving sentiment, especially in Eastern Europe, we believe these two funds could offer value for long-term investors.

1. iShares MSCI United Kingdom ETF

  • Current Price: $33.95
  • 52-week range: $30.55 - $35.09
  • Dividend yield: 4.24%
  • Expense ratio: 0.50% per year

Our first fund, the iShares MSCI United Kingdom ETF (NYSE:EWU), currently invests in 82 stocks from the UK. The fund started trading in March 1996.

EWU Weekly Chart
EWU Weekly Chart

According to the British Chambers of Commerce, inflation in the UK has been taking a toll on the country's consumption:

“Consumer spending is forecast to grow at 4.4% in 2022, down from its previous forecast of 6.9%.”

Similarly, business investment is expected to grow by 3.5%, down from the earlier forecast of 5.1%. Increasing costs, higher local taxes, and the decline in public confidence as a result of inflationary pressures and geopolitical developments are behind this revision.

However, despite the grey clouds over the British economy, the FTSE 100 index is well-diversified, providing access to some of the most important companies worldwide.

In addition, most of these names pay stable dividends. Therefore, many investors regard potential declines in value as an opportunity to buy into companies listed in the UK’s leading index.

EWU tracks the returns of the MSCI United Kingdom Index. In terms of sectors, we see consumer staples (18.33%), financials (17.49%), health care (13.28%), energy (11.42%), industrials (10.85%), and materials (10.27%), among others.

The leading 10 stocks in the portfolio account for close to half of net assets of $3.62 billion, making it a top-heavy fund.

Shell (NYSE:SHEL), AstraZeneca (NASDAQ:AZN), HSBC (NYSE:HSBC), Diageo (NYSE:DEO), Unilever (NYSE:UL), GlaxoSmithKline (NYSE:GSK), and Rio Tinto (NYSE:RIO) are some of the most prominent names on the roster.

The ETF is up 2.4% YTD and 7.8% in the past year. Rising global commodity prices have especially given a boost to EWU.

P/E and P/B ratios stand at 13.74x and 1.82x. Many of the companies in EWU are likely to increase their earnings in the coming quarters. Therefore, we remain bullish on companies listed in the FTSE 100 and EWU.

2. Xtrackers MSCI Europe Hedged Equity ETF

  • Current Price: $34.84
  • 52-week range: $30.92 - $37.05
  • Dividend Yield: 1.95%
  • Expense ratio: 0.45% per year

Recent research by VoxEU—the policy portal of the Centre for Economic Policy Research (CEPR)—highlights:

“Following a strong recovery by 5.3% in 2021, we forecast the EU economy to grow by 4.0% in 2022 and 2.8% in 2023.”

In other words, the European economy is likely to recover from the effects of the pandemic in 2023. However, it is too soon to tell how the war in Ukraine will affect the regional economy.

Our second fund, the Xtrackers MSCI Europe Hedged Equity ETF (NYSE:DBEU), invests in a wide range of European equities while mitigating the effects of currency fluctuations, which could otherwise affect performance significantly. The fund began trading in September 2013, and net assets stand at $527.9 million.

DBEU Weekly Chart
DBEU Weekly Chart

DBEU, which tracks the MSCI Europe US Dollar Hedged Index, currently has 439 securities. Financials have the largest slice with 15.73%. Next come health care (14.73%), industrials (14.04%), consumer staples (12.05%), consumer discretionary (10.18%) and others.

The fund’s leading 10 stocks comprise roughly 20% of its portfolio. Among those names are Nestle (OTC:NSRGY), ASML Holding (NASDAQ:ASML), Roche Holding (OTC:RHHBY), LVMH Moet Hennessy Louis Vuitton (OTC:LVMUY), and Novartis (NYSE:NVS).

Over 21% of the companies are based in the UK, followed by those from France (16.50%), Switzerland (15.72%), Germany (12.49%), and the Netherlands (7.99%).

DBEU hit a record high in January and returned 7.8% in the past year. However, it is down 4% YTD. Investors looking for exposure to equities from developed European markets, including the UK, should further research DBEU.

2 ETFs For Betting On A Rebound In European Stocks
 

Related Articles

Tim Knight
ETF Focus: Commodities By Tim Knight - Nov 13, 2022 1

Let’s look at a few commodity ETFs together. In general, they have remained in an uptrend for two years. This channel needs to break in order for commodities to start a downtrend,...

2 ETFs For Betting On A Rebound In European Stocks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email