European stocks are among this year’s best developed markets performers. One of the single-country exchange traded funds benefiting from that trend in a big way is the iShares MSCI Austria Capped ETF (NYSEArca: EWO).
EWO, the only ETF dedicated to Austrian stocks, is up a staggering 40.1% year-to-date after soaring nearly 9% over just the past month.
Globally, European equity exchange traded product assets under management has increased by 26% since the end of June 2016 while total global ETP assets have risen by 30% over the same period. Year-to-date, $28 billion has found its way into European equity ETPs.
“As a member of the European Union, Austria has to stay within the fiscal guidelines of the Fiscal Compact, and this calls for government deficits no larger than 3% and government debt no more than 60% of GDP,” according to a Seeking Alpha analysis of Austria’s economy. “I would estimate that if present trends continue the government spend will approach the 3% limit and be nearly double what they were in 2016. This is very positive for the private sector and does explain the excellent performance of the Austrian stock market over the last 12 months.”
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EWO has been around since early 1996, making it one of the oldest single-country ETFs on the market. The Austria ETF tracks the MSCI Austria IMI 25/50 and holds 25 stocks with a three-year standard deviation of 19.4%, making EWO more volatile than its France and Germany counterparts.
“Since January 2017, private credit creation has changed trend and increased 5% year to date. This is the strongest flow increase and together with the government sector flow increase also explains why the stock market has performed so well over the last 6 to 12 months,” according to Seeking Alpha. “All three sectors of the economy are adding fiscal flows to the stock of funds flowing in the economy. This enables financial assets in the private sector, such as stocks, bonds and real estate to increase in value.”
Like many single-country ETFS, EWO is heavy on financial services stocks with that sector accounting for 31% of the ETF’s weight. The ETF also features double-digit allocations to the materials, energy, real estate and industrial sectors.
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