United Kingdom equities and the British pound tumbled immediately following last month’s shocking Brexit decision, but many U.K. stocks have erased those losses, signaling that it could be time for investors to consider U.K. exchange traded funds. The iShares MSCI United Kingdom ETF (NYSEArca: EWU), a non-currency-hedged U.K. ETF, is the largest U.K. ETF trading in the U.S., but the Recon Capital FTSE 100 ETF (NasdaqGS: UK) is the true proxy for FTSE 100 stocks available to U.S. investors.
The Recon Capital FTSE 100 ETF the first U.S.-listed ETF to track the U.K.’s benchmark FTSE 100 index. All of the ETF’s top 10 holdings trade in New York in addition to London. That group includes familiar names such as HSBC (NYSE: HBC),BP (NYSE: BP) Royal Dutch Shell (NYSE: RDS-A) and GlaxoSmithKline (NYSE: GSK).
Related: ETFs to Watch as Brexit Uncertainty Mounts
“The FTSE 100 has recovered more than 10% from the Brexit bottom. If you missed the Brexit bounce, I would caution that the total return party is not over. With the S&P 500 trading at an all-time high the yield once again is dropping and, according to multpl.com, closed yesterday at a minuscule 2.03%. That’s not a lot to grab on to and makes us all dependent on capital gains to drive returns,” according to TheStreet.com.
[related_stories]The pound has declined to a three-decade low for the past two days on increased evidence the Brexit vote is weighing on confidence in Britain’s economy, Bloomberg reports. However, the Bank of England kept rates on hold last week, providing some support for the downtrodden currency at a time when many market participants were betting on a rate cut.
The pound has been the worst performing asset since the U.K.’s decision to leave the E.U., and the majority of analysts who’ve changed their forecasts since the referendum results are now projecting the currency to remain depressed.
Related: 10 ETFs Hit the Hardest in ‘Brexit’ Fallout
Aside from being the first ETF to trade in the U.S. that acts as a proxy for the FTSE 100, UK has other advantages, including a dividend yield that is well above that of the S&P 500.
“As of June 30, the FTSE 100’s yield was 3.84%,” according to TheStreet.com. “I’m watching the S&P 500 blow through all-time highs on a daily basis — and blow through 18.0x this year’s estimated earnings per share — and thinking this has to correct itself soon and there has to be more value elsewhere. I believe the FTSE 100 is one of those places.”