German Factory Orders Rise: ETFs To Buy

German factory orders increased 1% in May 2017 compared with a decline of 2.2% in April. However, it missed the Reuters forecast of 2%. On a year-over-year basis, it increased 3.7% compared with a 3.3% increase in April 2017.

While domestic orders declined 1.9%, orders from non-eurozone surged 4%. However, orders from eurozone increased 1.7%.

Per Bloomberg, the surge in orders was driven by export demand for investment goods, which increased 6% month on month.

Recently, German business confidence measured by The Institute for Economic Research (Ifo), hit a record high. It rose for the fifth straight time to 115.1 in June 2017 compared with 114.6 in May, the highest since 1991 (read: German Business Confidence Hits Record High: ETFs to Buy).

The German economy grew 0.6% in the first quarter of 2017 compared with a 0.4% growth in the previous quarter. Moreover, Ifo upgraded its growth outlook to 1.8% from 1.5% for 2017 and 2% from 1.8% for 2018.

The number of jobless in Europe’s largest economy increased by 7000 in June. This compares unfavorably with the forecast of a decline of 10000 in unemployment. Nonetheless, the jobless rate is still at a record low of 5.7%. This presents a case for stronger spending and growth.

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 (read: Merkel's Party Wins Key State Election: German ETFs in Focus).

HEWG has AUM of $841.55 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 17.75%, 15.38% and 13.89% allocation, respectively (as of July 5, 2017). The top three holdings of EWG are Siemens AG (DE:SIEGn), Bayer AG (DE:BAYGN) and SAP with 8.03%, 8% and 7.69% exposure, respectively (as of July 5, 2017). HEWG has returned 5.92% year to date and 25.3% in the last one year (as of July 6, 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 $122.41 million and charges 48 basis points in fees per year. Consumer Discretionary, Industrials and Financials are the top three sectors of this fund, with 23%, 18% and 17% allocation, respectively. 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 6.45%, 6.01% and 5.79% allocation, respectively (as of July 6, 2017). It has returned 7.72% year to date and 27.93% in the last one year (as of July 6, 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 $54.37 million and charges 45 basis points in fees per year. Consumer Discretionary, Materials and Financials are the top three sectors of this fund, with 18.26%, 14.07% and 13.89% allocation, respectively (as of March 31, 2017). From an individual holdings perspective, Siemens AG, Bayer AG and SAP SE (DE:SAPG) are the top three holdings of the fund, with 7.74%, 7.72% and 7.43% allocation, respectively (as of July 5, 2017). It has returned 8.24% year to date and 27.87% in the last one year (as of July 6, 2017). As such, DBGR currently has a Zacks ETF Rank #2 with a Medium risk outlook.

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