Wednesday’s ETF To Watch: MSCI Australia Index Fund (EWA)

by on February 15, 2012 | ETFs Mentioned:

The past few months have had all eyes fixated on the euro zone and whether or not the currency bloc would be able to withstand its looming debt crisis. Despite a recent Greek debt deal, you can almost certainly bet that this issue is far from over, as it has been lingering around markets for almost two years now. But while many are waiting to see what Europe will do next, others are looking to markets elsewhere to try and find investments with little ties to what seems to be a global hindrance. Now that earnings season is over, foreign government data will be one of the most important factors in finding new opportunities [see also Five Commodity MLPs With Sky High Yields].

Today will see the employment change figures from Australia, an economy that is often overlooked given the turmoil happening elsewhere. After a spotty 2011 as far as employment stands, the past two months have brought in dismal results for the nation. “Falling part-time employment stalled job growth last year, with total payrolls posting little change in the year through December, its worst annual performance since 1992″ writes Michael Heath.

The past two months have been given lofty predictions of around 10,000 jobs added, but both have come in with negative figures. Today’s report is expected to come in at just below 11,000, but it would be hard for any investors to get behind this forecast given the recent history of the country. “The trend over the past three or four quarters has shown interest rate sensitive sectors shedding jobs – in particular, retail and construction have been quite weak, mining’s been quite strong, but not enough to offset the falls elsewhere, so employment’s been pretty much flat” write Caroline Smith and Evan Schwarten. Note that due to time zone differences, this report will come out Wednesday after the close and investors who wish to make a play can anticipate a gap on Thursday morning [see also When Bond ETPs Don’t Make Distributions].

With this important economic indicator on tap, today’s ETF to watch will be the MSCI Australia Index Fund (EWA). This fund, which measures the equity performance of markets down under, has just under $3 billion in assets with an average daily volume just over 3 million. It should be noted that EWA features a bias towards the financial services (36.9%) and basic materials (27.1%) sectors as miners and banks account for a significant portion of the fund. If the employment change follows suit of the past two months, look for EWA to take a heavy hit on the day, but a jump in employment will likely lead to subsequent gains for the fund [see also iShares: The Low Cost ETF Issuer?].

Disclosure: No positions at time of writing.