Germany ETFs Surge On Stimulus Hopes

Germany, Euro zone’s biggest economy, shrank in the second quarter of this year. GDP contracted a seasonally-adjusted 0.1% sequentially in the quarter (in-line with market expectations), following a 0.4% expansion in the previous period and.

Global slowdown weighed on German’s export sector and Brexit also played a role. The construction sector also suffered. The GDP data has increased risks of an imminent recession for Germany after more than six years.

Demand for German cars and other goods has fallen in China in particular as growth in the world’s second-largest economy is cooling owing to rising trade tensions with the United States. But German chancellor Angela Merkel's government expects the economy to grow slightly this year and does not see the need for any incremental stimulus.

However, Finance Minister Olaf Scholz suggested that Germany could arrange 50 billion euros ($55 billion) of extra spending if crisis hits for rolling out possible fiscal stimulus for the first time, per Bloomberg.

Investors should note that U.S. President Donald Trump has attacked Germany’s auto industry frequently and so Germany might need to launch some stimulus measures down the line.

The possibility has boosted Germany’s stock market materially. Key ETFs gained in the recent trading session (see all European Equity ETFs here).

iShares MSCI Germany ETF EWG — Up 0.94% on Aug 20

The underlying MSCI Germany Index consists of stocks traded primarily on the Frankfurt Stock Exchange. SAP (10.33%), Allianz (DE:ALVG) (8.26%) and Seimens AG (6.4%) were the top three holdings of the fund. The fund yields 2.88% annually.

iShares MSCI Germany Small-Cap ETF EWGS — Up 1.2% on Aug 20

The underlying MSCI Germany Small Cap Index is designed to measure the performance of equity securities of small capitalization companies whose market capitalization, as calculated by the index provider, represents the bottom 14% of the German securities market. The fund charges 59 bps in fees and yields 3.31% annually.

First Trust Germany AlphaDEX Fund FGM— Up 1.1% on Aug 20

The underlying NASDAQ AlphaDEX Germany Index employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ Germany Index. The fund charges 80 bps in fees and yields 2.47% annually.

Global X DAX Germany ETFDAX — Up 1.7% on Aug 20

The underlying DAX Index tracks the segment of the 30 largest and most actively traded blue chip companies on the Frankfurt Stock Exchange. The fund charges 20 bps in fees and yields 4.63% annually.

Franklin FTSE Germany ETF FLGR — Up 1.4% on Aug 20

The underlying FTSE Germany RIC Capped Index is a market-capitalization weighted index representing the performance of large and mid-capitalization German stocks. The fund charges 9 bps in fees and yields 2.41% annually.

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