Propped up by the European Central Bank’s aggressive quantitative easing program, Eurozone equities and stock-related exchange traded funds, notably those with a heavier emphasis on the financial sector, could provide solid growth opportunities in the years ahead.
According to a Citigroup research note, Eurozone companies are set to deliver robust returns over the coming years, and the equities class has never been cheaper compared to fixed income in the past 60 years, reports Matt Clinch for CNBC.
“We stay bullish on European equities,” Citi said in the note. “Growth, in our view, validates the relative attraction of European equity.”
Specifically, Citi highlighted banks, insurance and financial services as some of the best areas of growth ahead.
ETF investors who would like to gain exposure to European financials can consider the iShares MSCI Europe Financials ETF (NYSEArca: EUFN). EUFN includes non-Eurozone members like the U.K. 31.1% and Switzerland 11.8%. Sub-sector allocations include banks 51.5%, insurance 27.1%, diversified financials 14.9% and real estate 5.9%. Its top components include HSBC Holdings 8.8%, Banco Santadner 5.2% and Allianz 4.1%. Potential investors, though, should be aware that the Europe Financial ETF is exposed to currency risks, so a depreciating euro currency could weigh on the U.S.-dollar-denominated returns.
Additionally, popular broad currency-hedged ETFs also include heavy financial sector tilts. For instance, the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) includes a 22.8% position in financials, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) has a 22.9% tilt and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) shows a smaller 11.0% position. [Europe ETFs Also Provide Investors With Attractive Yields]