ETF XRAY

German ETF (EWG) Buoyed by Stronger Economic Growth

There was good news for the German exchange-traded fund (EWG) as the German economy grew at its fastest rate for five years between April and June boosted by higher domestic demand. The economy grew 0.9% in the quarter - despite lower export growth - a level not seen since the first quarter of 2001.

Numbers for the previous quarter were also revised upwards, a sign that Europe's largest economy is finally achieving sustained economic growth. Investment in construction and equipment above all contributed to the economic upturn in the second quarter." Hochtief - Germany's largest builder posted a rise of 8.7% in its profits for the second quarter. Much of the World Cup, hosted by Germany, took place during this second quarter, which also acted as a fillip to the economy.

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By DE Smith of MyPortfolioView

Higher GDP Growth Buoys German ETF

The German exchange-traded fund (EWG) already includes top world class multinationals such as Siemens, BASF and BMW but the kicker is stronger German growth and consumer spending numbers. The German economy grew by 3.6 per cent year-on-year in the first quarter, a stronger-than-expected performance given the headwind of higher taxes earlier this year.

The fiscal picture is also improving with Germany expecting to deliver its first balanced budget in 40 years by the end of the decade based on stronger tax revenues.

Based on this new estimate, the German Finance Ministry said the total state deficit, including the social security system, federal, regional and local government budgets, could reach zero by 2010, while the federal government could achieve the first surplus since 1969 a year later.

By Carl Delfeld of the Chartwell ETF Advisor

German ETF Flies With Two Engines

The Germany exchange-traded fund (EWG) has companies at the top of its ETF basket that are undisputably first class multinationals - Siemens, BMW, Allianz, DaimlerChrysler and BASF. For some time, I have argued therefore that the German ETF was tied more to the fortunes of global growth and especially markets like India and China than its slow growth home economy.

But now we are seeing improvement at home as companies increase capital spending and Germans start to open their pocketbooks. This could be a second engine. Germany’s economic recovery is broadening, with domestic investment particularly strong. Ralph Atkins of the FT reports that falling unemployment should also feed through into stronger consumer spending – long the country’s Achilles heel. Imports were up 1.7 per cent in the first quarter of 2007, reflecting the improvement in domestic demand, although March’s figures also showed a fall compared with February. Germany is still the world's largest exporter and although German export growth lost momentum in the first three months of this year, the underlying trend remains strong.

The German ETF (EWG) is up 16% so far this year and is part of a couple of Chartwell's seven ETF portfolios.

By Carl Delfeld of the Chartwell ETF Advisor

Germany Big ETF Winner

Data tracking capital flows from big money mamnagers into funds and exchange-traded funds from Emerging Portfolio Fund Research (EPFR) show that Germany was the big winner among developed markets during February. A three month, $1.7 billion buying streak by equity funds and ETFs pushed its average weighting among Global Equity Funds above that of France for the first time in more than five years.

Energy sector weightings continued to slide during February, dropping out of the top five sector allocations. As for flow of funds, Global Utilities Sector funds and ETFs such as (JXI) have been the most consistent winners this year. Equity funds and ETFs were net sellers of $2.7 billion of Chinese equities in February but investors and fund managers retained their appetite for smaller, more defensive Asian markets. Malaysia and Singapore both saw record-setting net buying from these funds.

EPFR tracks equity and bond fund flows, cross border capital flows, country and sector allocations, and company holdings data from its universe of 15,000 international, emerging markets and US funds and ETFs with $8 trillion in assets.

By Carl Delfeld of the Chartwell ETF Advisor

German ETF a Broad Global Play

The German economy and exchange-traded fund or ETF (EWG) is sometimes thought to be closely tied to the auto industry. An excellent article in the Economist describes the intense competition on the high and low end of the global auto business and how it will affect luxury brands like BMW and Mercedes.

But actually one of the attractions of EWG is its broad diversification. The auto industry accounts for just 10% of the ETF basket with 13% for insurance, 10% for chemicals, 9% for industrial conglomerates, 9% for utilities, 11% for finance and banking and 5% each for the telecom and paper industries. All of these companies are world-class competitors more focused on global growth than their low growth home market. For some of them, emerging markets like India and China are just as important to the top line growth as German consumers.

By Carl Delfeld of the Chartwell ETF Advisor