For investors interested in finding out the painful areas of investing, iShares MSCI Germany ETF (EWG - Free Report) is probably on the radar now. The fund just hit a 52-week low, and shares of EWG are down roughly 26.3% from their 52-week high price of $30.84/share.
Are more pains in store for this ETF? Let’s take a quick look at the fund and its near-term outlook to get a better idea of where it might be headed:
EWG in Focus
EWG looks to track the performance of the Garman equity market. The fund has a focus on large caps with key holdings in the Consumer Discretionary, Financials, Health Care, Materials and Industrials sectors. EWG charges investors 48 basis points a year in fees and has top holdings in Bayer AG, Daimler AG and Siemens AG (see all European Equity ETFs here).
Why the Move?
The German equity market has been an area to watch lately as the German automaker Volkswagen AG (VLKAY - Free Report) was accused of tricking on the Environmental Protection Agency (EPA) test. Per EPA, Volkswagen had set up a software algorithm which allowed it to mislead U.S. emissions tests and the carmaker has admitted the charge.
This blame on the iconic carmaker led its stock to lose over 30% in the first two days of this week. Also, the probe can be widened to other German automakers if there is any discrepancy in the results. This weighed on the key auto industry of Germany and all investing tools of that market. Moreover, Volkswagen is in collaboration with Daimler AG – one of the top holdings of EWG – to manufacture the Crafter delivery van. All these business threats soured investors’ mood toward German investing.
More Pains Ahead?
Currently, EWG has a Zacks ETF Rank #3 (Hold) so it is hard to make out its future returns one way or another. However, the fund has a negative weighted alpha of 17.30. A negative weighted alpha hints at more pain. So, it is wise to stay on the sidelines and wait for better entry points for those who are currently not into the Germany ETF. Things will likely take some more time to stabilize.
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