Time to Say G’Day to Australia ETFs
Exchange traded funds tracking Australian still have been solid performers in recent weeks, though the funds still labor below the peaks seen earlier this year. After the country’s most recent jobs report, Australia ETFs could soon be making fresh highs.
During Thursday’s Asian session, Australia, the world’s 12th-largest economy, said it added a record 121,000 jobs last month compared to the 12,000 economists expected. The unemployment rate fell to 6.1%. Putting Australia’s August job growth into context, the U.S., the world’s largest economy, added just 142,000 jobs last month.
Jobs numbers, regardless of country, are backward-looking indicators, but that does not mean investors should look past the iShares MSCI Australia ETF (EWA) and rival Australia ETFs. EWA and the WisdomTree Australia Dividend Fund (AUSE) are up an average of 2% over the past month, a gain that easily trumps the 1.3% gained by the iShares MSCI Pacific ex Japan ETF (EPP) over the same period. [Australia ETFs Impress]
Australia stocks and ETFs are benefiting as the Australian dollar is faltering. While it could easily rally a bit after the jobs report, the CurrencyShares Australian Dollar Trust (FXA) is off 2.3% over the past 90 days and ended Wednesday just half a percent above its 200-day moving average, indicating a spate of interest rate cuts by the Reserve Bank of Australia since late 2011 are starting to have the desired impact of weakening the Aussie. [Aussie ETFs Get a Domestic Consumption Lift]
The U.S. dollar’s recent strength had the Aussie residing near five-month lows against the greenback heading into Thursday’s Asian session.
Although Australia’s interest rates reside at a record low of 2.5%, those are high by the standards of the developed world and enough to cement Australia’s as one of the highest-yielding advanced economies in the world. EWA has a trailing 12-month yield of 3.66%.
Australian companies paid $40.3 billion in dividends last year, nearly double the amount paid in 2012. the largest increase among the 10 biggest developed equity markets. [Australian Dividend Growth]
Australia’s status as one of the best ex-U.S. developed market dividend destinations increases the allure of the newest Australia ETF, the SPDR MSCI Australia Quality Mix ETF (QAUS) .
QAUS debuted in June as part of a six-ETF suite of single-country ETFs from State Street Global Advisors emphasizing the quality factor. QUAS and its five stablemates track MSCI Indices. The quality factor “captures excess returns to stocks that are characterized by low debt, stable earnings growth and other ‘quality’ metrics,” according to MSCI.
QAUS’ underlying index sports a dividend yield of 4.25% and the ETF features a combined weight 53.4% to the financial services and materials sectors, both of which are significant contributors to Australia’s dividend growth story.
iShares MSCI Australia ETF
