iShares MSCI Australia ETF
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Fisher Asset Management LLC acquired a new position in shares of iShares MSCI Australia ETF (NYSEARCA:EWA) in the second quarter, according to its most recent 13F filing with the SEC. The institutional investor acquired 129,527 shares of the exchange traded fund's stock, valued at approximately $3,409,000. Fisher Asset Management LLC owned about
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Creative Planning raised its holdings in shares of iShares MSCI Australia ETF (NYSEARCA:EWA) by 17.7% in the undefined quarter, according to its most recent filing with the Securities and Exchange Commission. The institutional investor owned 72,156 shares of the exchange traded fund's stock after acquiring an additional 10,852 shares during the quarter.
iShares MSCI Australia ETF offers broad exposure to large- and mid-cap Australian equities, with heavy concentration in banking and materials sectors. EWA benefits from improving Australia-China relations, structural demand for critical minerals, and a strong banking sector supported by government housing initiatives. Risks include overvaluation, potential export slowdowns in iron ore and coal, and vulnerability to housing market and geopolitical shocks.
Australia's monthly inflation indicator jumped to its highest level in a year in July, affirming the Reserve Bank of Australia's cautious approach to cutting interest rates over recent months.
iShares MSCI Australia ETF has underperformed the EAFE Index due to heavy Materials sector exposure and ongoing industrial metals volatility. Valuation is a concern, with EWA trading at a premium P/E and a high PEG ratio despite modest long-term growth. Technical analysis shows EWA struggling below long-term resistance, with no clear bullish momentum and weak seasonal trends ahead.
EWA offers investors exposure to Australian equities, providing diversification away from US-centric risks and trade policy uncertainties. I previously identified Australia as a relatively safe non-US option amid concerns about US tariffs and foreign policy volatility. The fund's performance has been reasonable in hindsight, supporting the thesis of value in Australian markets.
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Topping the list and outperforming in that span have been emerging market countries like Brazil and India, which are both up well over 6.5%. International ETFs don't only have momentum on their side, but they also offer higher yields than the US at the current moment. Across all 22 ETFs, the average yield stands at 3.25%.
Australia's key investment markets—stocks, bonds, and real estate—present lucrative opportunities driven by market cycles and liquidity sources. Stocks are poised for an upward breakout, likely within two years, fueled by the explosive phase of the real estate cycle. Bonds offer opportunities in both new high-yield bonds and older low-yield bonds, with potential gains when interest rates decrease.
Evaluating iShares MSCI Australia ETF as an investment option at its current market price, tracking Australian equities. Previously cautious on EWA, favoring US, Europe, and Canada, which proved justified as EWA's return has been flat. I now see a buy case emerging, as the equities are cheaper than the S&P 500 and offer a strong dividend yield.
Australian stocks have done well in 2024, although they have not kept pace with the S&P 500. I see some positives "down under", including a rising labor force participation rate and growing wages. However, there are headwinds that concern me more. These include richly priced valuations and an earnings season for banks that is likely to disappoint.
Australian shares are poised to rise on Wednesday, with futures showing a nearly 0.2% gain.
Shanghai CSI 300 has gone from a 52-week low to a 52-week high in only a couple of weeks. Other than China and Hong Kong, Australia is the only other international market starting the week at a 52-week high.
Australia has long been recognised for having the highest average dividend yield among global markets. However, this yield has been on a downward trend since 2022.
US equities have outperformed the rest of the world for a long time now. While the US is up 58% on a total return basis during the current bull market, the rest of the world is up 13.5 percentage points less at +44.5%. Looking at the international dividend ETF over a longer time frame, over the last five years, it's up 20.6% in price and more than double that on a total return basis.
iShares MSCI Australia ETF has underperformed, with a 0% price return over the past 3 years and a total return of only 15.7%. EWA's high exposure to the materials sector and low exposure to technology result in low-single digit earnings growth forecasts for the coming years. The fund's current forward P/E ratio of 17.5x is on the high end, making it expensive relative to its historical valuation range.
iShares MSCI Australia ETF provides targeted exposure to the Australian equities market, with a focus on large- and mid-cap companies. The EWA fund's top holdings include BHP Group, Commonwealth Bank of Australia, CSL Ltd., National Australia Bank, and Westpac Banking Corporation. EWA offers a straightforward and low-cost way for investors to access the Australian equity market, but it has a significant concentration in the financial sector and may lack diversification benefits for those already exposed to the Asia-Pacific region.
EWA offers exposure to Australian large- and mid-caps, with a tilt toward financials and materials, resulting in a more comfortable P/E than that of the S&P 500. The issue is that Australia's economic growth is anemic, while inflation might require more action from the RBA. All these do not look bullish for stocks. EWA's past performance leaves a lot to be desired, with the 2010s and 2020s being especially challenging as it trailed SPY, delivering higher volatility.