Friday’s ETF To Watch: iShares MSCI Canada Index Fund (EWC)

by on April 8, 2011 | ETFs Mentioned:

So far this year, commodity prices have been very kind to investors who have reaped the benefits of supply issues, weather, and political turmoil, pushing a variety of products to higher prices. This boom has been especially favorable to commodity-intensive economies around the world, be it Australia, Russia, or closer to home, Canada. America’s neighbor to the North is one of the biggest producers of a variety of products ranging from oil to wheat, and thanks to its relatively small population, the export dollars per capita have provided a huge boost to the country’s overall economy. Still, questions remain over how this boom in the agricultural and petroleum sectors can carry over into the jobs market in order to help the nation slash its unemployment rate. Fortunately, investors will get some insight on this problem later today when Canada releases its monthly unemployment report.

In the report, Canada is expected to show a decline in overall unemployment to 7.7%, a ten basis point decrease from the last report. Additionally, the country is expected to show a robust level of growth in overall employment; Canada is projected to add 29,600 people to payrolls this month, a huge increase from last month’s uptick of 15,100. However, too great of an increase is likely to put price pressure on the Canadian economy and could force the country’s central bank to follow the ECB and hike rates sooner rather than later. Thanks to this possibility investors should definitely hone in on the overall change in jobs in the country for possible clues on future actions by the central bank [see Three Country ETFs That Could Benefit From Triple-Digit Oil].

Thanks to these import data releases, investors should look for the iShares MSCI Canada Index Fund (EWC) to be in focus throughout today’s trading session. The popular fund, which has amassed more than $6.5 billion in assets, tracks the broad Canadian equity market by following the MSCI Canada Index. In total the fund has just over 100 securities with three sectors making up the bulk of the assets; financials, energy, and basic materials. Interestingly, these three sectors tend to be ones in which high levels of employment changes are likely to be seen and thus could be heavily impacted by today’s data release [March ETF Stats: Another Solid Quarter].

Should the employment data disappoint investors later today, it could signal to many that the recent commodity boom has not translated to more jobs for the nation. If this is the case, look for EWC to sell of on the day as traders look to achieve more targeted exposure instead of the broad market allocation with EWC. If, on the other hand, unemployment is significantly slashed, it could help propel EWC higher on the session, although an especially strong move could stoke fears over a rate hike in the near future. Either way, look for EWC and its small cap counterpart CNDA, to be in for a rocky day of trading as this important data is released to the broad market [read ETFs For The Forgotten Asset Classes].

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Disclosure: No positions at time of writing.