The European Central Bank meets Thursday, but news leaked Wednesday that the ECB is set to announce $58 billion in monthly bond purchases over at least a year.
It is not clear whether the bond buying will be spread across the Eurozone or whether individual central banks will be responsible for their own sovereign debt, according to the Wall Street Journal. However, it is clear that financial markets are all but demanding ECB President Mario Draghi unveil the Eurozone equivalent of Federal Reserve quantitative easing.
Some Europe exchange traded funds indicate investors are prepared for such an announcement.
As of Tuesday, inflows to the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) were $718 million since the start of 2015, a total surpassed by just four other ETFs. That extends a trend of asset-gathering dominance by HEDJ. One of the largest currency hedged ETFs, HEDJ added almost $5.1 billion in new assets last year, the ninth-best total among all U.S. ETFs.
HEDJ now has $6.5 billion in assets under management after crossing $1 billion last April. WisdomTree reconfigured the ETF in the third quarter of 2012 from a multi-country, multi-currency fund to its current form, a move that combined with the dollar’s resurgence and the euro’s slide has made the fund increasingly attractive to investors seeking Eurozone exposure. [Hedged Europe ETF Tops $1B in AUM]
Germany and France, the Eurozone’s two largest economies, combine for nearly 51% of HEDJ’s weight.
After hauling in over $725 million in assets last year to make it one of the fastest growing ETFs, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU) has added over $69 million in new assets this year. [These ETFs Have Swelled in Size]
DBEU is not a dedicated Eurozone play as the ETF features exposure to British, Swiss and Nordic equities, making it comparable to diversified Europe ETFs, such as the Vanguard FTSE Europe ETF (NYSEArca: VGK).
France, Germany, the Netherlands and Spain account for almost 40% of DBEU’s weight. Importantly, DBEU proves currency hedging works. The ETF is down just 0.56% over the past 12 months while the unhedged VGK is lower by 10.3% over the same period.
In another sign of traders preparing for Euro-weakening news from the ECB, on Wednesday, there was talk of unusual options activity in the iShares MSCI Germany ETF (NYSEArca: EWG), the largest U.S.-listed Germany ETF, and the iShares MSCI Italy Capped ETF(NYSEArca: EWI).
EWG and rival Germany ETFs, including the Recon Capital DAX Germany ETF (Nasdaq: DAX), are candidates for some upside, particularly if the ECB does not task Germany’s Bundesbank with buying bonds of weaker Eurozone nations, such as Greece.
WisdomTree Europe Hedged Equity Fund
