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Jacinda Ardern Elected New Zealand PM: ETFs in Focus

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Kingmaker Winston Peters, leader of the anti-immigration New Zealand First, announced in a press conference that his party will support Jacinda Ardern’s centre-left labour party. In a three-way coalition along with the Green party and New Zealand First, Ardern secured the prime ministerial position in an unlikely victory in the recently held elections (read: New Zealand ETFs in Focus after Election Stalemate).


“There are far too many people living in degraded and poor conditions in this country,” Peters said. “The people of this country did want change and we have responded to that. Our choice today relates to how well we mitigate, not worsen, what is coming”, he added.


New Zealand’s former prime minister Bill English’s National Party won 44.4% votes and has 56 seats in the 120-strong parliament. English has stated that National will be a strong opposition because of its presence in the parliament.


Coalition Arrangement


Labour and NZ First together will control 55 seats in the parliament. Therefore, Green’s eight lawmakers helped Ardern cross the 61 seat threshold to become prime minister.


However, per a CNN article, Greens will not be an official coalition party. The Greens, through their presence in the government will be guaranteeing support to the government on major budgetary issues and votes of confidence.


Ardern’s Approach


Ardern has warned Australian prime minister Malcom Turnbull that if his government restricts the rights of New Zealanders to tertiary education in Australia, a similar action would be taken by her government.


Moreover, she has vowed to stick with the Trans Pacific Partnership only if she is allowed to restrict foreign investment in housing. “Our view has been that there has to be a balance between delivering for our exporters but also making sure we can protect the ability of New Zealanders to buy homes, our view is we can do both”, Ardern said.


Investors are concerned about Labour’s hard-line stance on immigration, as it could negatively impact growth. Moreover, New Zealand First’s populist ideology adds to the agony. However, Peters also added that the massive number of unskilled immigrants concern his party and assured immigrant-dependent companies not to worry about reduction in skilled labour immigration.


Let us now discuss the most popular New Zealand ETF, ENZL (see all Asia-Pacific (Developed) ETFs here).


iShares MSCI New Zealand Capped ETF (ENZL - Free Report)

This ETF provides exposure to equities of companies based out of New Zealand. The fund has AUM of $169.3 million and charges 48 basis points as fees per year. From a sector look, Utilities, Health Care and Industrials take the top three spots, with 18.3%, 18.0% and 13.2% allocation, respectively (as of Oct 20, 2017). From an individual holding perspective, Fisher & Paykel Healthcare Corp, Spark New Zealand Ltd and Auckland International Airport Ltd are among the top holdings of the ETF, with 10.6%, 9.5% and 8.4% allocation, respectively (as of Oct 20, 2017). The fund has returned 7.4% in a year and 16.5% year to date (as of Oct 20, 2017). ENZL currently carries a Zacks ETF Rank #3 (Hold) with a Low risk outlook.


We will now compare the performance of ENZL to a broad Asia Pacific ETF, DVYA.


iShares Asia/Pacific Dividend ETF (DVYA - Free Report)


This ETF aims to provide exposure to companies in Australia, Hong Kong, New Zealand, and Singapore. The fund has AUM of $42.1 million and charges 49 basis points as fees per year. It has 50.3% exposure to Australia, 28.8% to Hong Kong, 11.6% to New Zealand and 9.3% to Singapore (as of Oct 20, 2017). From a sector look, Financials, Consumer Discretionary and Telecommunications take the top three spots, with 23.4%, 18.1% and 17.9% allocation, respectively (as of Oct 20, 2017). From an individual holding perspective, Spark New Zealand Ltd, Giordano International Ltd and Starhub Ltd are among the top holdings of the ETF, with 4.6%, 4.4% and 4.2% allocation, respectively (as of Oct 20, 2017). The fund has returned 7.8% in a year and 9.9% year to date (as of Oct 20 2017). DVYA currently carries a Zacks ETF Rank #3 with a Medium risk outlook.

Below is a chart, comparing the year-to-date performance of the two funds.


 
Source: Google Finance


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