Australia ETF Could Steady in the Months Ahead

The $1.46 billion EWA tracks the MSCI Australia Index and holds 69 stocks. The ETF allocates over 39% of its weight to financial services stocks, more than double its second-largest sector weight, which is materials.

“Australia’s general government debt ratio, at 41.2% of GDP in FY17, is in line with the ‘AAA’ median. Nevertheless, a 22pp rise in public debt since 2010, when debt/GDP was 34pp lower than the ‘AAA’ median, has eroded the country’s previous fiscal strength relative to peers. Fitch continues to expect general government debt to peak in FY18, at 41.8% of GDP, and to maintain a downward trajectory thereafter,” according to Fitch.

Australia’s economic growth is expected to be solid and above the average rate forecast for other AAA-rated countries.

“Fitch forecasts a modest acceleration in GDP growth from 2.3% in 2017 to 2.7% in both 2018 and 2019, above the ‘AAA’ median,” said Fitch. “Growth will be supported by higher non-mining private investment and public infrastructure investment, particularly as the drag from the substantial multi-year decline in mining investment fades.”