A Guide to Country-Specific ETFs in the Asia-Pacific Region
Australian exchange-traded funds
Australian equities are accessible via ETFs like the WisdomTree Australia Dividend ETF (AUSE) and the iShares MSCI Australia ETF (EWA). More diversified options, with over 50% of their portfolio invested in Australian stocks are the iShares Asia/Pacific Dividend ETF (DVYA) and the iShares MSCI Pacific ex-Japan ETF (EPP).
Out of these options, the iShares MSCI Australia ETF (EWA) has the highest trading volume, allowing you to easily buy and sell the fund. Let’s take a closer look at the fund.
The iShares MSCI Australia ETF
The EWA has been around since March 1996. It has ~$1.6 billion in assets under management and tracks the MSCI Australia Index. It has an expense ratio of 0.49%, which makes it one of the cheaper options available among Australian ETFs, though not the cheapest.
The underlying index, and thus the ETF, has nearly 70% of its assets in two sectors: financials and materials. Financials dominate, making up 52% of the portfolio. The exposure to financials has climbed significantly from 2010, when it made up a little less than 40% of the portfolio. The Commonwealth Bank of Australia is the largest holding among financials, followed by Westpac Banking (WBK).
Materials-related stocks, which accounted for a little over 30% of the portfolio in 2010, now make up a little above 16%. Their share in the portfolio has declined in each year since 2010. The sector has the highest exposure to BHP Billiton (BHP).
ADRs (American Depository Receipts) of WBK and BHP are traded frequently on US exchanges.
2015 has not been good for the ETF so far, with returns of -0.9% as of June 10. However, in the past three years, the fund has returned 19%, and in the past five years it has returned 42.7%.
If major exposure to Australia at this time does not seem comfortable to you, you can look at the Vanguard FTSE Pacific ETF (VPL), which has 17.5% of its assets invested in Australian stocks, among other stocks like Mitsubishi UFJ Financial Group (MTU).
In the next article, let’s look at investment options for Hong Kong.
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