Consumer Confidence in the U.K. increased marginally to 107.3 in July 2017 compared with 107.1 in June, according to a report from YouGov and the Centre for Economic and Business Research. A reading above 100 suggests that a greater number of consumers are confident than not. However, per Bloomberg, the index has not recorded a back-to-back reading below 108 since 2013.
Earlier in June, prime minister Theresa May lost her parliamentary majority in a snap election and had to lock in a deal with the Democratic Unionist Party (DUP) in order to retain power. This political upheaval was a drag in confidence among the Britons. However, the slight rebound reflects easing concerns over the political scenario and wage squeeze faced by the people (read: Theresa May Spends 1B Pounds to Keep Majority: ETFs in Focus).
U.K.’s economy grew a modest 0.3% in the second quarter of 2017 compared with 0.2% in the first quarter. The country’s economy was the worst performer in the European Union in the first quarter.
The International Monetary Fund (IMF) downgraded U.K.’s growth forecast to 1.7% for 2017 compared with its earlier forecast of 2%. The downgrade was primarily due to Brexit uncertainty, as it clouds the GDP outlook for U.K.
Although the rebound indicates optimism, we do not believe it is enough to justify an interest rate hike when the Bank of England (BOE) meets on August 3, 2017 to decide on the country’s monetary policy (read: U.K. Inflation Drops: ETFs in Focus).
Let us now discuss a few currency-hedged ETFs focused on providing exposure to the U.K. (see all European Equity ETFs here).
iShares Currency Hedged MSCI United Kingdom ETF
For investors looking to gain exposure to the British markets in particular, this fund is one of the most popular pure-play options available. It seeks to maintain equity exposure to its un-hedged version EWU, while hedging away currency fluctuations between the dollar and the British pound.
The fund has AUM of $21.18 million and charges 49 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 22.70%, 18.69% and 13.84% allocation, respectively (as of July 28, 2017). The top three holdings for EWU are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.74%, 5.97% and 4.91% allocation, respectively (as of July 28, 2017). It has returned 4.02% year to date but has lost 2.69% in the last one year (as of July 31, 2017). HEWU currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
WisdomTree United Kingdom Hedged Equity Fund
This fund seeks to provide exposure to the U.K. dividend paying companies with an export tilt, while also hedging the currency risk.
The fund has AUM of $14.42 million and charges 48 basis points in fees per year. Consumer Staples, Energy and Financials are the top three sectors of this fund with 17.89%, 15.47% and 15.07% allocation, respectively (as of July 31, 2017). The top three holdings for the fund are Royal Dutch Shell PLC Class B, Vodafone Group PLC and Royal Dutch Shell PLC Class A with 5.29%, 5.24% and 5.06% allocation, respectively (as of July 31, 2017). It has returned 3.43% year to date but has lost 4.78% in the last one year (as of July 31, 2017). DXPS currently has a Zacks ETF Rank #3 with a Medium risk outlook.
Deutsche X-trackers MSCI United Kingdom Hedged Equity ETF
This fund seeks to provide exposure to the U.K. equities, while also hedging the currency risk.
The fund has AUM of $5.36 million and charges 45 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 23%, 19% and 14% allocation, respectively. The top three holdings for the fund are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.75%, 5.98% and 4.90% allocation, respectively (as of July 28, 2017). It has returned 6.02% year to date but has lost 11.05% in the last one year (as of July 31, 2017). DBUK currently has a Zacks ETF Rank #3 with a Medium risk outlook.
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U.K. Consumer Confidence Steadies: ETFs in Focus
Consumer Confidence in the U.K. increased marginally to 107.3 in July 2017 compared with 107.1 in June, according to a report from YouGov and the Centre for Economic and Business Research. A reading above 100 suggests that a greater number of consumers are confident than not. However, per Bloomberg, the index has not recorded a back-to-back reading below 108 since 2013.
Earlier in June, prime minister Theresa May lost her parliamentary majority in a snap election and had to lock in a deal with the Democratic Unionist Party (DUP) in order to retain power. This political upheaval was a drag in confidence among the Britons. However, the slight rebound reflects easing concerns over the political scenario and wage squeeze faced by the people (read: Theresa May Spends 1B Pounds to Keep Majority: ETFs in Focus).
U.K.’s economy grew a modest 0.3% in the second quarter of 2017 compared with 0.2% in the first quarter. The country’s economy was the worst performer in the European Union in the first quarter.
The International Monetary Fund (IMF) downgraded U.K.’s growth forecast to 1.7% for 2017 compared with its earlier forecast of 2%. The downgrade was primarily due to Brexit uncertainty, as it clouds the GDP outlook for U.K.
Although the rebound indicates optimism, we do not believe it is enough to justify an interest rate hike when the Bank of England (BOE) meets on August 3, 2017 to decide on the country’s monetary policy (read: U.K. Inflation Drops: ETFs in Focus).
Let us now discuss a few currency-hedged ETFs focused on providing exposure to the U.K. (see all European Equity ETFs here).
iShares Currency Hedged MSCI United Kingdom ETF
For investors looking to gain exposure to the British markets in particular, this fund is one of the most popular pure-play options available. It seeks to maintain equity exposure to its un-hedged version EWU, while hedging away currency fluctuations between the dollar and the British pound.
The fund has AUM of $21.18 million and charges 49 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 22.70%, 18.69% and 13.84% allocation, respectively (as of July 28, 2017). The top three holdings for EWU are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.74%, 5.97% and 4.91% allocation, respectively (as of July 28, 2017). It has returned 4.02% year to date but has lost 2.69% in the last one year (as of July 31, 2017). HEWU currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
WisdomTree United Kingdom Hedged Equity Fund
This fund seeks to provide exposure to the U.K. dividend paying companies with an export tilt, while also hedging the currency risk.
The fund has AUM of $14.42 million and charges 48 basis points in fees per year. Consumer Staples, Energy and Financials are the top three sectors of this fund with 17.89%, 15.47% and 15.07% allocation, respectively (as of July 31, 2017). The top three holdings for the fund are Royal Dutch Shell PLC Class B, Vodafone Group PLC and Royal Dutch Shell PLC Class A with 5.29%, 5.24% and 5.06% allocation, respectively (as of July 31, 2017). It has returned 3.43% year to date but has lost 4.78% in the last one year (as of July 31, 2017). DXPS currently has a Zacks ETF Rank #3 with a Medium risk outlook.
Deutsche X-trackers MSCI United Kingdom Hedged Equity ETF
This fund seeks to provide exposure to the U.K. equities, while also hedging the currency risk.
The fund has AUM of $5.36 million and charges 45 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 23%, 19% and 14% allocation, respectively. The top three holdings for the fund are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.75%, 5.98% and 4.90% allocation, respectively (as of July 28, 2017). It has returned 6.02% year to date but has lost 11.05% in the last one year (as of July 31, 2017). DBUK currently has a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>