European equities posted a healthy return in February with 2.9% added to the S&P Europe 350 Index. The strong index performance was reflected in the £2.3 billion iShares Europe ETF (NYSE: IEV) which uses the index as its underling reference. It has fees of 0.60%.
Tim Edwards, Senior Director, Index Investment Strategy at S&P Dow Jones Indices.
Tim Edwards, Senior Director of Index Investment Strategy, S&P Dow Jones Indices, said, “Europe’s performance this month seems to have defied logic, providing returns across the board despite widespread political uncertainty.”
All but one measure of performance provided positive returns for investors last month, with momentum investors the ultimate winners and the S&P Europe 350 Momentum Index returning 6.5%. Edwards notes: “While equity benchmarks have remained fairly untroubled, reading between the lines there are some signs of nervousness: defensive sectors, and defensive strategies, largely outperformed their peers.
“With the first round of the French election, a Dutch general election and the official start of the UK’s “Brexit” negotiations looming, it will be intriguing to see whether the equity markets’ positive performance will continue, or if instead we’ll see a bit more volatility coming back into European equities.”
Looking at county breakdowns, the UK was the greatest contributor to Europe’s performance in February, accounting for 1.0% of the broad absolute return. In second and third were Switzerland and Germany, accounting for 0.5% and +0.4% respectively.
Every single major economy contributed positive performance in Europe, apart from Norway, which was more or less flat.
Exposure to the UK can be gained through the iShares Core FTSE 100 UCITS ETF (LON: ISF) which tracks the UK’s bellwether large-cap index. It has AUM of £4.7bn with an expense ratio of 0.07%.
For Swiss exposure and German exposures, investors may wish to turn to Amundi’s ETFs. The Amundi MSCI Switzerland UCITS ETF (Euronext: CSW) tracks around 40 of the leading stocks on the Six Swiss Exchange. The ETF has AUM of €195m with an expense ratio of 0.25%.
The Amundi MSCI Germany UCITS ETF (Euronext: CG1) tracks around 60 of the leading stocks in Germany and has AUM of €170m with an expense ratio of 0.25%.
Health care, consumer staples and technology proved the best performers in terms of sectors, returning 6.6%, 6.1% and 5.9% respectively, and accounting for the bulk of Europe’s positive performance. Just two sectors recorded losses, with the energy sector and financials contributing small losses of -0.33% and -0.48% for the month.
Investors looking for pure-play access to European sector ETFs may consider the following funds from iShares or SPDR ETFs.
The iShares STOXX Europe 600 Health Care UCITS ETF (Xetra: EXV4) has AUM of €792m and an expense ratio of 0.46%.
The SPDR MSCI Europe Consumer Staples UCITS ETF (LON: CSTP) has AUM of €173m and an expense ratio of 0.30%.
The iShares STOXX Europe 600 Technology UCITS ETF (Xetra: EXV3) has AUM of €56m and an expense ratio of 0.46%.