Europe Share Buybacks Could Support International ETF Momentum

International stock exchange traded funds are enjoying a great boost from Eurozone markets as Europe’s record-breaking earnings season also came with a jump in number of company share repurchases.

The buyback announcements were the cherry on top after Europe’s near 150% quarterly profit surge, the best since Refinitiv IBES records began in 2012. Analysts now project that they will provide a further tailwind for the pan-European STOXX 600 index, which is already trading at record highs, Reuters reports.

“Something is changing: more companies are announcing bigger buybacks and I think this will continue…It can be a growth stock, a value stock, a cyclical stock,” Morgan Stanley’s chief European equity strategist Graham Secker told Reuters.

According to market intelligence provider Alphasense, 808 mentions of buybacks occurred on earnings calls over the 180 days ended August 2, or a 4% year-on-year increase and the strongest reading since late 2016.

Many market observers are hopeful that the surge in buybacks could help fuel further upward momentum in the European equities market, similar to what has happened in the U.S., where repurchases are far more common and stocks have increased by almost three times as much as their European counterpart over the past decade.

Tom O’Hara, portfolio manager at Janus Henderson, argued that more buybacks would be momentous for Europe, potentially helping the market shares to re-rate sharply.

Investors had to be convinced buybacks would be “part of the DNA of the company,” O’Hara told Reuters, adding that “the market does need to get that little bit of extra comfort that this is something management teams are serious about and will stick with.”

Investors interested in international markets can consider ETF strategies for foreign exposure. For example, the Avantis International Equity ETF (AVDE) is built upon an academically-supported, market-tested framework to identify securities with expected high returns based on market prices and other company information. Relying on trading and portfolio management processes, the Avantis team analyzes whether the perceived benefits of a trade overcome its associated costs and risk. AVDE primarily invests in a diverse group of companies of all market capitalizations across non-U.S. developed market countries, sectors, and industries, emphasizing investment in companies believed to have higher expected returns.

Additionally, the American Century Quality Diversified International ETF (NYSEArca: QINT) utilizes the American Century Investments Intelligent Beta methodology, which systematizes many of the same attributes that fundamental research and security selection seek to identify in a rules-based, indexed approach. QINT is a large foreign blend fund that seeks to enhance core international exposure. Its rules-based approach analyzes each stock’s quality, growth, and value characteristics to select individual securities. It also dynamically adjusts exposures to take advantage of prevailing market conditions.

For more news, information, and strategy, visit the Core Strategies Channel.