Business Confidence in Europe’s largest country hit a record high in June 2017. It rose for the fifth straight time to 115.1 in June compared with 114.6 in May, highest since 1991. The rise in optimism is mainly being attributed to a surge in domestic consumption and exports.
The index, measured by The Institute for Economic Research (Ifo), is a survey conducted with around 7,000 businesses in Germany panning across the construction, wholesale and retail industries.
The strong Manufacturing Purchasing Managers Index (PMI) figures reflect strength in the manufacturing sector. Although the reading declined to 59.3 in June from 59.5 in the previous month, it was still above market expectations of 59.
The German economy grew 0.6% in the first quarter of 2017 compared with a 0.4% growth in the earlier quarter. Consumer Prices in Germany rose 1.5% year over year in May 2017 compared with a 2% rise in April (read: German and Spanish Inflation at Record Low: ETFs in Focus).
Moreover, Ifo upgraded its growth outlook to 1.8% from 1.5% for 2017 and 2% from 1.8% for 2018.
Germany goes to polls in September to elect their new chancellor. Multiple state election victories for Angela Merkel’s party has ignited further confidence in the people regarding a potential victory for Merkel in the primary elections, thereby securing another term as chancellor of Germany (read: Merkel's Party Wins Key State Election: German ETFs in Focus).
Let us now discuss a few ETFs that are primarily focused on providing exposure to German equities (see all European Equity ETFs here).
iShares Currency Hedged MSCI Germany ETF HEWG
This fund is an appropriate bet for investors looking to gain exposure to Germany without betting on the euro and is the hedged version of EWG. We believe it is best to remain hedged to the currency till political uncertainty in the region is dealt with.
HEWG has AUM of $913.43 million and charges 53 basis points in fees per year. Consumer Discretionary, Financials and Health Care are the top three sectors of this fund, with 17.73%, 14.64% and 14.63% allocation, respectively (as of June 23, 2017). The top three holdings of EWG are Bayer AG (DE:BAYGN), Siemens AG (DE:SIEGn) and SAP, with 8.49%, 8.03% and 7.94% exposure, respectively (as of June 23, 2017). HEWG has returned 11.88% year to date and 34.13% in the last one year (as of June 26, 2017). As such, HEWG currently has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
WisdomTree Germany Hedged Equity Fund DXGE
This fund seeks to provide exposure to German equities without betting on the euro.
DXGE has AUM of $125.97 million and charges 48 basis points in fees per year. Consumer Discretionary, Industrials and Financials are the top three sectors of this fund, with 22.43%, 17.57% and 16.01% allocation, respectively (as of June 26, 2017). From an individual holdings perspective, Allianz (DE:ALVG) SE, Daimler AG (DE:DAIGn) and Siemens AG are the top three holdings of the fund, with 5.98%, 5.83% and 5.69% allocation, respectively (as of June 26, 2017). It has returned 11.29% year to date and 31.57% in the last one year (as of June 26, 2017). As such, DXGE currently has a Zacks ETF Rank #2 with a Medium risk outlook.
Deutsche X-trackers MSCI Germany Hedged Equity ETF DBGR
This fund seeks to provide exposure to German equities while hedging away currency risk.
DBGR has AUM of $63.89 million and charges 45 basis points in fees per year. Consumer Discretionary, Financials and Health Care are the top three sectors of this fund, with 17%, 14% and 14% allocation, respectively. From an individual holdings perspective, Bayer AG, Siemens AG and SAP SE (DE:SAPG) are the top three holdings of the fund, with 8.28%, 7.84% and 7.75% allocation, respectively (as of June 23, 2017). It has returned 11.89% year to date and 34.01% in the last one year (as of June 26, 2017). As such, DBGR currently has a Zacks ETF Rank #2 with a Medium risk outlook.
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WISDMTR-GER HEF (DXGE): ETF Research Reports
ISHA-CH MS GERM (HEWG): ETF Research Reports
DEUTS-XT MS GER (DBGR): ETF Research Reports
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