Investors seeking to follow the United Kingdom’s stock market record run may be better off with a currency-hedged country-specific exchange traded fund option as the pound sterling remains weak against the U.S. dollar.
Over the past month, the CurrencyShares British Pound Sterling Trust (NYSEArca: FXB) fell 1.5% as the British pound depreciated to $1.2239. The weaker pound has also dragged on the non-iShares MSCI United Kingdom ETF (NYSEArca: EWU), which only rose 3.5% over the past month.
Meanwhile, currency-hedged U.K. ETFs that provided a purer play on the underlying market have more closely followed the U.K. market’s recent push toward record highs. For instance, over the past month, the iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) gained 5.2%, WisdomTree United Kingdom Hedged Equity Fund (NasdaqGM: DXPS) rose 4.3% and Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK) increased 4.6% while the FTSE 100 Index advanced 6.7%.
The FTSE 100 ended 0.5% higher Tuesday at 7,177.89 points after hitting a record 7,205.45 during trading, moving past the peak reached at the end of 2016, Reuters reports.
The currency-hedged ETFs are trading at record highs as well.
The start of 2017 is already looking much rosier than the start of 2016 when concerns over Chinese growth gripped markets.
“Given a year ago (when) investors came back from the Christmas break to see markets plummet, it is no doubt a big relief that this year has started more positively. The PMI numbers are surprisingly strong,” Adrian Lowcock, investment director at Architas, told Reuters.
Growth sensitive stocks helped support the rally in British stocks, with miners and energy leading the charge as strong PMI readings pointed to further economic growth heading into 2017.
“We’ve been particularly bullish on the FTSE whilst a lot of people were going short,” John Moore, trader at Berkeley Capital, told Reuters. “It’s just good news all round.”
For more information on the U.K., visit our United Kingdom category.