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Australia Unemployment at 4 Year Low: ETFs in Focus

June 16, 2017
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Australia’s unemployment rate has fallen to a four-year low, as almost 42,000 net job additions were made in the month of May. The unemployment rate dropped to 5.5% from 5.7% in April and came below the market estimates of 5.7%. The data released by the Australian Bureau of Statistics (ABS) also stated that the seasonally adjusted workforce participation rate rose to 64.9% in May from 64.8% in April.

Full-time work witnessed 52,100 new jobs whereas part-time work suffered a reduction in jobs to the tune of 10,100. The market forecast was of a net job addition of 10,000. ABS stated that around 150,000 new jobs have been added so far this year. The data release led to a surge in the Australian dollar (read: Australia Business Conditions & Confidence High: ETFs to Buy ).

Reserve Bank of Australia (RBA) in its last meet on June 6, 2017 left its benchmark interest rate unchanged for the 10th consecutive month. Interest rates were slashed to a record low of 1.5% in August 2016. The surge in job additions indicates that another rate cut is unlikely in the near future (read: Australia Keeps Rates Unchanged: ETFs in Focus ).

However, Australia’s GDP grew 1.7% in the first quarter of 2017, its slowest pace since September 2009. This adds uncertainty to the path of interest rate hikes.

Let us now discuss a few ETFs focused on providing exposure to the Australian economy (see all Asia-Pacific (Developed) ETFs here ).

IShares MSCI Australia Index FundEWA :

This fund is the most popular Australia ETF in the space, offering exposure to the most liquid equities in the Australian economy. It tracks the MSCI Australia Index.

This fund has AUM of $1.79 billion and charges a relatively moderate fee of 48 basis points a year. From a sector look, Financials, Materials and Real Estate are the top three allocations of the fund, with 41.85%, 15.78% and 8.80% exposure, respectively (as of June 13, 2017). Commonwealth Bank Of Australia, Westpac Banking Corporation Corp and Australia and New Zealand Banking group are the top three holdings of the fund, with 10.89%, 8.06% and 6.50% allocation, respectively (as of June 13, 2017). The fund has returned 9.89% year to date and 22.15% in the last one year (as of June 14, 2017). EWA currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

WisdomTree Australia Dividend FundAUSE :

This ETF is another popular fund offering exposure to the Australian economy and tracks the WisdomTree Australia Dividend Index.

This fund has AUM of $36.83 million and charges a fee of 58 basis points a year. From a sector look, Financials, Materials and Consumer Discretionary are the top three allocations of the fund, with 24.72%, 22.94% and 13.58% exposure, respectively (as of June 14, 2017). Rio Tinto Ltd, Orica Ltd, and Australia and Alumina Ltd are the top three holdings of the fund, with 3.82%, 3.69% and 3.44% allocation, respectively (as of June 14, 2017). The fund has returned 10.80% year to date and 23.62% in the last one year (as of June 14, 2017). AUSE currently has a Zacks ETF Rank #3 with a Medium risk outlook.

SPDR MSCI Australia Quality Mix ETFQAUS :

This fund tracks the MSCI Australia Quality Mix A-Series Index, which is an index of Australian securities targeting performance of sub-indexes based on one of the three factors: quality, low-volatility, and value. Each sub-index receives equal weight.

This fund has AUM of $15.54 million and charges a fee of 30 basis points a year. From a sector look, Financials, Real Estate and Materials are the top three allocations of the fund, with 31.46%, 15.62% and 12.29% exposure, respectively (as of June 13, 2017). Wesfarmers Limited, CSL Limited and Commonwealth Bank of Australia are the top three holdings of the fund, with 6.26%, 5.73% and 5.70% allocation, respectively (as of June 13, 2017). The fund has returned 9.96% year to date and 18.84% in the last one year (as of June 14, 2017). QAUS currently has a Zacks ETF Rank #3 with a Medium risk outlook.

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ISHARS-AUSTRAL (EWA): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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