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5 European ETFs Soaring on French Election Results


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The global stock market cheered the outcome of the first round of France's presidential elections wherein the centrist candidate Emmanuel Macron won with nearly 24% votes, erasing fears of a populist rise.  

Macron will race in the second round of the election on May 7 with the far-right candidate Marine Le Pen, who got 21.3% votes. Macron is seen as the market-friendly candidate while Le Pen has threatened the future of France, calling for a referendum on European Union (EU) membership (read: Will French Election Ever Have an Adverse Effect on Global ETFs? ).

The latest polls suggest that Macron is everyone's favorite and will likely win at least 60% of the votes in the second round. In particular, Harris survey and an Ipsos/Sopra Steria poll point at 64% chances of Macron winning the runoff while the Elabe poll shows that Macron will take 65% of votes in a second-round run-off against Le Pen.

The optimism surrounding Macron's victory has put aside Frexit prospects and infused fresh optimism in not only the French economic outlook but also the whole of Europe. As per Christopher Dyer, director of global equity at Eaton Vance, the outcome will increase the appetite for borrowing and investments in Europe. Consequently, European banks should be the prime beneficiaries of pro-growth, pro-stimulus and non-protectionist policies.

Stocks Rally Everywhere

The elections triggered a strong rally across the globe with the MSCI All-Country World Index hitting record highs. European stocks notched their best day in nearly two years. Particularly, France's CAC 40 posted its largest one-day jump of 4.1% in nearly five years and hit levels not seen since early 2008 while Germany's benchmark DAX reached a fresh high. Euro surged to the highest level since November against the U.S. dollar.

Meanwhile, Wall Street gained with the three major indices jumping more than 1% and the tech-heavy Nasdaq index hitting new record highs.

Coming to sectors, bank stocks were strong performers all over the world with the Stoxx Europe 600 bank Index rising 4.8%, the highest close since December 2015, and the KBW Bank Index gaining 2.5% (read: This Was the Best Bank ETF in March ).

While the rally was broad-based, European ETFs have outperformed post French election results on Monday. We have highlighted the five best-performing funds of the day that are expected to see smooth trading in the next few days as well. All these products have a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.

iShares MSCI Italy Capped ETF EWI

The Italy ETF was the best performer of the day, climbing 6.2% on higher volume of 1.5 million shares compared with 1.1 million shares on average. It tracks the MSCI Italy 25-50, holding 23 stocks in its basket. The financials sector dominates the fund's portfolio with one-third share  while energy, utilities, industrials and consumer discretionary round off the top five with double-digit exposure each (read: What Does Italy Referendum Mean for These ETFs? ).

iShares MSCI France ETF EWQ

This ETF offers targeted exposure to 76 large and mid-sized companies in France by tracking the MSCI France Index. It has double-digit holdings in each of the industrials, consumer discretionary, financials, healthcare and consumer staples sectors. It has AUM of $341.6 million and charges 48 bps in annual fees. The product surged 5.8% post results and trades in an elevated volume of 2.2 million shares compared with 915,000 shares on average (read: France ETF Hits New 52-Week High ).

iShares MSCI Europe Financials ETF EUFN

This fund gained 5.8% on the day on volume of 1.5 million shares versus 1.1 million shares on average. It provides exposure to the financial segment of the developed European market by tracking the MSCI Europe Financials Index. It holds 87 securities in its basket with banking firms accounting for a major 54.5% of the portfolio. Insurance and diversified financials round off the next two spots. In terms of country exposure, United Kingdom takes the top spot at 29.2% while Switzerland, France, Germany, and Spain make up for at least 11% share each. EUFN has amassed $916.8 million in its asset base and charges 48 bps in fees a year.

SPDR EURO STOXX 50 ETF FEZ

This fund follows the EURO STOXX 50 Index, which measures the performance of some of the largest companies across the components of the 20 EURO STOXX Supersector Indexes. The fund is rich with AUM of $2.9 billion and charges 0.29% in expense ratio. Holding 55 securities in its basket, the product is tilted toward the financial sector at 22.1% while industrials, consumer discretionary, consumer staples and healthcare round off the top five. In terms of country allocation, France and Germany are leading with 35.7% and 33.6% share, respectively, followed by Spain (10.8%), the Netherlands (9.8%), and Italy (4.5%). The fund was up 5.6% on the day and trades in elevated volume of more than 15.6 million shares compared with 3 million shares on average (read: Join Eurozone Rally with These ETFs ).

iShares MSCI Spain Capped ETF EWP

With AUM of around $1.1 million, this fund tracks the MSCI Spain 25/50 index and is home to a basket of 26 stocks. Financials takes the top spot at 41.8% in terms of sector holdings, followed by industrials (15.8%) and utilities (10.8%). Expense ratio comes in at 0.48%. EWP added 5.2% post French election and saw volume of more than 3.7 million shares against an average of 1.3 million shares.


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ISHARS-FRANCE (EWQ): ETF Research Reports

ISHARS-MS EU FN (EUFN): ETF Research Reports

ISHARS-ITALY (EWI): ETF Research Reports

SPDR-EU STX 50 (FEZ): ETF Research Reports

ISHARS-SPAIN (EWP): 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.



This article appears in: Investing , ETFs
Referenced Symbols: EWQ , EUFN , EWI , FEZ , EWP


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