5 ETFs To Play Australia

Over the last century, Australia has outperformed its counterparties in the developed world, while offering one of the lowest volatilities to investors. As for the future, the Land Down Under is expected to continue its growth, providing returns and the path to opportunity for some. 

A major reason that the future remains prosperous for Australia is due to its close ties with Asia.  According to the International Monetary Fund (IMF), exports to China and India have been growing at a rate of 18%-19% per year and are expected to continue to grow.  As China and India continue to emerge as global economic powerhouses, Australia will likely continue to reap the benefits.  In fact, Asia as a region is expected to witness economic growth of nearly 50 percent over the next five years and account for more than a third of total global output. 

Another driver behind Australia’s appeal is its abundance of natural resources.  The nation has ample supply of coal, oil, iron ore, potash, zinc and other commodities that growing economies demand.  As populations continue to expand and purchasing power in emerging Asia continues to increase, so will demand for natural resources.  Furthermore, Australia is rich in gold, which has remained a hot commodity and is likely to continue to do so due to fiscal and monetary policies implemented by some developed nations around the world.

Lastly, Australia has relatively stable financial system when compared to that of other developed nations.  The nation was hardly touched by the global financial meltdown, is expected to boast its twentieth year of economic expansion and has a public debt ratio which stands around 18 percent of its GDP.  Additionally, the nation has an unemployment rate which is a hair over 5 percent and has a positive balance of trade.

At the end of the day, there are numerous forces working in Australia’s favor and some ways to gain access to the country include:

  • iShares MSCI Australia Index Fund (EWA) which has 74 holdings with the following sector breakdowns: 44.35% to financials, 26.4% to materials, 10.19% to consumer staples and 6.67% to energy.
  • IQ Australia Small Cap ETF (KROO), which gives exposure to small cap Australian stocks that are involved in natural resources.  KROO allocates 39.33% of its assets to materials, 19.92% to consumer discretionary and 10.8% to industrials.
  • WisdomTree Pacific ex-Japan High Yielding Equity Fund (DNH), which allocates 90.5% of its assets to Australia.
  • WisdomTree Pacific ex-Japan Total Div Report (DND), which allocates 59.2% of its assets to Australia.
  • PowerShares FTSE RAFI Asia Pacific ex-Jp Portfolio ETF (PAF), which allocates 41.2% of its assets to Australia. Its top holdings include BHP Billiton and Rio Tinto.

Although an opportunity seems to exist in Australia, it is equally important to keep mind the inherent risks that are involved with investing in equities. To help mitigate these risks having an exit strategy is a good idea.  Such a strategy can be found at www.SmartStops.net.

Disclosure: No Positions


About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

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