The Euro-zone has finally emerged out of its18 month long
recession. It now appears that the 17 nation Euro-zone has slowly
begun to stabilize.
Euro-zone's manufacturing sector advanced in August after
posting two years of sluggish performance, thanks to surge in
factory activity in Italy and Germany. According to MARKIT,
manufacturing purchasing managers' index rose from 50.7 in July
to 52 in August (see:
Time to Get on the German ETF Bandwagon?
While the U.K. and Germany are leading the way for the
European recovery, much-troubled Greece is also showing some
hope. At the same time, manufacturing activity in Austria and
France has fallen. (See:
Greece ETF on the Rise, Can It Continue?
A rebound in China's economic activity, slow exit of Germany
& France from the recession and a revival in the Euro-zone
service sector after 19 long months together have been a catalyst
for European stocks.
While factors like a rising Euro, increasing unemployment and
fiscal tightening still impact the domestic consumption in the
region, the outlook for the region looks much more positive now
from the longer-term perspective. (read:
Has the Euro ETF Bottomed Out?
Investors who seek to play in Europe can look at some of the
small cap ETFs analyzed below.
iShares MSCI United Kingdom Small-Cap (
Launched in January 2012, EWUS is a passively managed fund and
tracks the MSCI UK Small Cap Index. The product gives investors a
broad exposure in U.K. stocks. The product has been ignored by
investors as it has amassed only $7.2 million in assets so
The fund holds 232 stocks in which the top 10 stocks take a
low share of 13.26%. The fund does not put more than 2% share in
any of its fund. Mondi Plc, Taylor Wimpley and Asos Plc are the
top 3 holdings of the fund.
Consumer Discretionary (25%), Industrials (19.82%) and
Financials (19.46%) are the top 3 sectors of the fund. More than
65% share goes to small-cap stocks, while mid-cap and micro-cap
take the rest of the share. The fund charge investors 59 bps in
The ETF has given strong returns of 27% as of June 30 on a
yearly basis and has a notable dividend yield of 2.87%.
iShares MSCI Germany Small-Cap (
Launched in January 2012, EWGS is a passively managed fund and
tracks the MSCI Germany Small Cap Index. The product is most
suited for investors who seek a broad exposure in German stocks
as the fund puts more than 90% of its assets in Germany. The fund
has $8.9 million in assets and charge investors 59 bps in
The product holds 107 holdings in its basket. The product is
well diversified across individual holdings as it puts nearly 33%
securities in its top 10 holdings. Symrise Ag, MTU Aero Engines
and Bilfinger are the product's top 3 holdings. Industrials,
Financials and Consumer Discretionary take the top 3 spot in
sector holdings, jointly contributing about 59% share.
The ETF has posted solid returns of 28.37% as of June 30 for a
one year period and has given a decent yield of 1.83%. (Read:
The Comprehensive Guide to German ETF
Wisdom Tree Europe Small Cap Dividend (
Launched in June 2006, DFE tracks the Wisdom Tree Europe Small
Cap Dividend Index and gives an overall exposure to European
stocks. The fund is a solid choice for investors looking at the
trends appearing in Europe. The fund has an asset base if $85.6
million and charge investors 58 bps in fees.
Industrials take the top allocation from a sector look (26%),
followed by consumer discretionary (16%) and financials (15%).
Country exposure is once again focused on the UK, while Sweden
and Italy also receive double digit allocations. Logitech
International, Drillisch AG and Holmen AB are the top 3 company
holdings of the fund.
The product has given impressive returns of 32% as of June 30
on an annual basis and moreover gives an attractive yield of
High Dividend ETFs to Buy Even If the Fed
The Bottom Line
While an end to Euro-zone recession doesn't mean that the
region will act as a new engine of growth for the global economy
anytime in near future, it is a net positive for investment
sentiment worldwide. (See all
European Equity ETFs here
That said, Europe still has a long way to go as many of the
structural issues that have been at the core of the currency
union's recent problems still remain unresolved. (Read:
3 European ETFs Holding Their Ground
). But from the longer-term perspective, European stocks and ETFs
look attractive as of now as it appears that the worst may be
over for the region. Further small cap companies look quite
interesting due to their attractive valuation and higher growth
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WISDMTR-EU SC D (DFE): ETF Research Reports
ISHARS-MS GRMSC (EWGS): ETF Research Reports
ISHARS-MS UK SC (EWUS): ETF Research Reports
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