iShares MSCI Australia (NYSEArca: EWA) and IQ Australia Small-Cap (NYSEArca: KROO) have been hit over the last 10 days as flooding in the land Down Under intensifies. The long-term damage to the Aussie economy and these exchange traded funds (ETFs) is still an open question, though.
The floods that have hit Queensland may have a lasting impact on the economy and projected growth. According to Staff reporter on Commodity Online, the Treasurer of Queensland, Andrew Fraser, estimated that the total damage of the floods would be in the “billions of dollars.” [Coal ETFs Surge As Floods Threaten Production.]
Fortunately, the impact on the broader economy may still be a scant 1% – first-quarter growth estimates have been revised downward by 0.2%.
One area that the floods have undoubtedly benefited is coal ETFs. While EWA and KROO have been sinking over the last 10 days, Market Vectors Coal (NYSEArca: KOL) and PowerShares Global Coal (NYSEArca: PKOL) have been doing the exact opposite, gaining 5.5% and 3.3% respectively in the same time frame.
That’s because Australia’s role in the global coal markets isn’t trifling. Carl Delfeld for Investment U reports that Queensland boasts about 40% of Australia’s coal resources and accounts for 56% of production, which makes it the biggest hub for the country’s coal exports. [Australia Flooding Sinks Some ETFs, Lifts Others.]
Last year, Australia produced some 22.5 million metric tons of wheat, with 14.5 mmt of that being exported – about 11% of global exports. It’s estimated that the flooding has impacted more than half of the Australian wheat crop. PowerShares DB Agriculture (NYSEArca: DBA) hasn’t seen as much of a pop as the coal ETFs in recent days, but it too could feel the impact of rising waters.
Tisha Guerrero contributed to this article.
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.