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Germany ETFs
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About Germany ETFs |
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Germany ETFs: Overview and forecast
Germany is starting to take up the ETF concept. It's a natural place for ETFs to take root, because Germany is a high capital investment market. The original German ETF was iShares MSCI Germany Index Fund (AMEX:EWG), which has had an interesting price history for traders, showing strong indications of good margins and volumes.
The German capital market is a bit different from the rest of Europe, particularly in the private investment area. It's more highly capitalized, and resembles the US market in some respects. EWG, as the longest running German ETF, is a reasonably good study of the market. This ETF does trade particularly well, by global standards, and could be a good indicator of the ETF market's potentials in Germany.
Germany is often called the powerhouse of the European economy, and that description in terms of investment capital is pretty much justified. Two new ETFs have recently come online, the two DAX based ETFs, and it's reasonable to expect this big capital market will develop its own version of the ETF mixes common in the US and UK.
Short term (6 months)
EWG managed a good rebound in the second quarter of 2009. EWG has a portfolio of holdings which are relatively strongly weighted, aimed at returns based on the MSCI Germany index. The weighting is interesting, because the holdings relate to the big German corporations, and that adds some punch to the returns equation.
This model of weighting has the occasional disadvantage of taking direct index moves, but the returns from the individual higher weighted holdings can generate very good positive returns, and balance out losses, too. The net result was a very healthy response to its lows, going up from under $13 in March to near $20 in June. The potential for further upside is obvious. The German market and EWG responded in a very similar way to the US market to the crash, and there is definitely strength in the holdings.
Medium term (2 years)
Germany's demographics are a potentially big asset for good movements in the investment market. An aging population is causing some rethinking of the funds markets generally, and the funds are looking for better options. The evolution of the funds market is focusing on better returns, too.
In the medium term, it's likely that the German market will be looking for more choices, and the logical evolution of the ETF market in Germany would be to widen the scope and style of investments. Expect to see developments as these second tier investors and fund managers approach the problem.
Long term (5 years)
It's more than likely that Germany's investment market will take up new options. The retiree and general investment markets have been an issue in Germany for a while, up to government level. There are significant social policy issues involved, and the big German fund market prefers to solve problems rather than institutionalize them.
In five years, a range of possible financial investment products will incorporate a good mix of ETFs. The problem for the German market is where to put the cash, and the ETF model, which is based on spreads and investment styles, is the best suited, most flexible approach to cover all the angles.
Qualifiers to projections
The German market is closely linked to the global market, but investors should be aware that this is a big economy in its own right, and that local issues do affect the market performance, therefore affecting ETFs. The German market's dynamics are somewhat different, and there's also the ?European? element, to consider. European markets are basically part of the one bigger market, and are affected by Europe's various ups and downs.
Germany's demographic issues will definitely affect the local capital investment markets, both at fund level and private investor level. Investors in German ETFs should be fully au fait with the situation, prior to investment. It's also possible that the German government will take a hand in investment matters, and add incentives to this range of investments. Any foreign investors are strongly advised to make sure they're up to speed on the ramifications for their own interests in the market.
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Last Updated on: 2010-01-14 02:03:40 |
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