German Industrial Output Falls: ETFs in Focus

German Industrial Output, adjusted for inflation and seasonal swings, fell 1.1% in June 2017 compared with a 1.2% rise in May and expectations of a 0.2% gain. This was the first time the measure has declined since December 2016.

While manufacturing output declined 1.4% in the month, construction output fell 1%. However, the Economy Ministry in Berlin said that the total output in the second quarter increased 1.8% on a quarterly basis.  

The ministry said that total manufacturing orders increased 1% in June on a monthly basis, while it increased 5.1% year over year in June compared with 3.8% in the previous month (read: German Factory Orders Rise: ETFs to Buy).

Germany goes to polls in September to choose its next Chancellor, which creates political uncertainty in the region. However, people are confident because polls show Angela Merkel securing a comfortable victory in the elections. GfK Consumer confidence in Germany increased to 10.8 in August compared with 10.6 in July and above expectations of 10.6.

The German economy grew 0.6% in the first quarter of 2017 compared with a 0.4% 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 declined 9,000 in July. This compares favorably with the forecast of a decline of 5,000 in unemployment. Moreover, the jobless rate is 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 those 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 $813.54 million and charges 53 basis points in fees per year. Consumer Discretionary, Financials and Materials are the top three sectors of this fund, with 18.16%, 16.13% and 14.01% allocation, respectively (as of August 4, 2017). The top three holdings of EWG are SAP, Bayer AG and Siemens AG with 7.84%, 7.72% and 7.44% exposure, respectively (as of August 4, 2017). HEWG has returned 5.46% year to date and 12.74% in the last one year (as of August 7, 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 $118.37 million and charges 48 basis points in fees per year. Consumer Discretionary, Industrials and Financials are the top three sectors of this fund, with 23.33%, 18.03% and 17.60% allocation, respectively (as of August 7, 2017). From an individual holdings perspective, Allianz SE, Bayerische Motoren Werke AG and BASF SE are the top three holdings of the fund, with 6.79%, 5.69% and 5.56% allocation, respectively (as of August 7, 2017). It has returned 6.33% year to date and 14.23% in the last one year (as of August 7, 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 $53.85 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 17.33%, 14.70% and 13.70% allocation, respectively (as of June 30, 2017). From an individual holdings perspective, SAP SE, Bayer AG and Siemens AG are the top three holdings of the fund, with 7.68%, 7.57% and 7.29% allocation, respectively (as of August 4, 2017). It has returned 6.27% year to date and 13.47% in the last one year (as of August 7, 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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