The iShares MSCI Australia (EWA) exchange traded fund (ETF) began the year slow, but has performed nicely, as it is up 27% for the year. Proving the critics wrong, Australia’s diverse economy is anything but a commodity. Diversification is key, with 5% GDP in mining, 5% to tourism, and 80% to services. It is the third largest stock market in the region and a leading regional financial center.
EWA is taking advantage of the country’s continued growth. The largest exposure is in the banking sector, followed by the materials area, according to Carl Delfeld. Issues like growth of government and labor rules shouldn’t slow the economy much because measures have been taken to avoid this. A personal cut in income taxes over three years and rising interest rates should also help.
Altavista Independent Research reports that Australia is the "Land of Dividends". Australian stocks pay exceptionally high dividends – 62% of earnings. This is because Australia ended double taxation of dividends and investors began to demand more. With this high payout, companies tend to invest only in projects with the highest expected returns, so company earnings continue to rise.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.