Beyond US, These Foreign ETFs Are At Highs

U.S. stocks have been rallying since the news of the phase-one U.S.-China trade deal emerged in October. The S&P 500 crossed the 3,100 level and the Nasdaq steered past the 8,500 mark. The Dow Jones Industrial Average edged past the 28,000 threshold (read: Wall Street Hits Record High: Leveraged ETFs to Play).

“The stocks most exposed to the China trade war are back to prior peaks – and pre-trade war/1Q18 levels – in terms of both performance and valuation,” per analysts. Apart from hopes on the trade front, a decent earnings season, better-than-expected U.S. GDP growth rate for the third quarter, extension of Brexit and global easy money policies are fueling the equity rally.

Tensions related to global growth have somewhat ebbed. Also, oil prices remained more-or-less stable in the past month along with the broader commodity market.

But investors should note that not only the United States, several foreign markets have also been trading at their highs of late. Notably, iShares MSCI exchange-traded funds tracking Italy, Germany, France and Japan have been on a tear as well.

Global Policy Easing: A Shot in the Arm

Overall, growth issues have led major central banks to ease policies.In its September meeting, the European Central Bank (ECB) slashed its main deposit rate by 10 basis points to a record low of a negative 0.5% and also launched a quantitative easing (QE) program starting Nov 1. The QE program will call for asset purchases worth 20 billion euros per month for as long as the economy needs. This marks the second round of QE from the ECB, the first having occurred four years ago (read: ETFs to Gain & Lose as ECB Starts QE, Cuts Rates).

Euro zone growth has slowed sharply over the past year and the central bank had to act diligently to avert the possibility of a recession. Meanwhile, the Fed has slashed key rates three times since July. The Bank of Japan is also practicing a QE policy and has rock-bottom interest rates (negative) in place.

On the geopolitical front, the likelihood of a U.S.-China mini trade deal boosted global stocks. The news spread optimism throughout the globe. There was a trade deal between Japan and the United States too. On Nov 19, Japan’s lower house of parliament approved a mini trade deal agreed upon by prime minister Shinzo Abe with the United States, paving the way for tariff cuts next year on items including U.S. farm goods and Japanese machine tools, per Reuters. All these have been propelling global stocks higher.

Below we highlight a few international ETFs that hit a 52-week high lately.

iShares MSCI Germany ETF EWG

The fund hit a fresh 52-week high of $29.26 on Nov 19. The underlying MSCI Germany Index consists of stocks traded primarily on the Frankfurt Stock Exchange. Consumer Discretionary, Financials, Industrials, Information Technology and Health Care have a double-digit weight in the fund.

iShares MSCI Japan ETF (EWJ)

The fund touched its 52-week high of $60.15 on Nov 7. Though the economy has grown at the slowest pace in a year in the third quarter, it did not disrupt the equity market rally. Subdued yen has benefited export-oriented stocks. Industrials (20.95%), Consumer Discretionary (18.58%), Information Technology (11.61%) and Financials (10.52%) are the top four sectors (read: Japan's Preliminary Q3 GDP Data Disappoints: ETFs in Focus).

iShares MSCI Italy ETF (LON:EWI)

The fund hit its fresh 52-week high of $29.73 on Nov 12. The fund is heavy on financials sector with about 32.08% exposure, followed by utilities (23.9%), energy (12.6%), consumer discretionary (12.5%) and industrials (11.3%).

iShares MSCI France ETF EWQ

The fund hit a 52-week high of $32.00 on Nov 19. Industrials (23.2%), Consumer Discretionary (18.9%), Financials (10.9%) and Consumer Staples (10.8%) are the top four sectors of the fund.

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