Take A Look At The U.K. ETF As the Country’s Current AAA Rating Is Not In Jeopardy

europe“Investors looking to participate in any rebound in the U.K. economy need look no further than the iShares MSCI UK Index (NYSE: EWU), which offers investors a broad exposure to the major sectors and companies operating in the U.K. Recently, our friends across the pond were encouraged when rating Moody’s stated that the country’s current AAA rating was not in jeopardy. Such a decision carries profound macroeconomic risks as there are many large institutional investors that have investing mandates that would be compromised if the U.K. loses its pristine rating. Not to mention, the country’s borrowing costs would rise, hurting current holders of U.K. debt,” Sham Gad Reports From Investopedia.

Gad Continues, “The prime advantage of the U.K. Index ETF is that the majority of its holdings comprise businesses that are very globally diversified with broad exposure to other regions. Giant oil conglomerate Royal Dutch Shell (NYSE: RDS.A) (NYSE: RDS.B) accounts for nearly 9% of the index-weighting, as does financial giant HSBC (NYSE: HBC). Rounding up these large holdings are telecommunications company Vodafone (NASDAQ: VOD) and pharmaceutical giant Astrazeneca (NYSE: AZN). The ETF currently trades for $16.66, which is fairly close to its NAV of $16.79 per share, and yields a very respectable 3.5%.”

“Shares in EWU currently trade near its 52-week high of $17.20, although the P/E multiple is an attractive 13-times earnings. While the ETF does offer a broad exposure to the overall U.K. economy, financials represent over 20% of the ETF. With recent news headlines that the U.K. is taxing bank bonuses, it appears that the British government may implement new measures that could affect the future profitability and competitiveness of U.K. banks,” Gad Reports.

Here are some details on the iShares MSCI UK ETF (EWU):

The investment (EWU) seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the British markets, as measured by the MSCI United Kingdom index. The fund normally invests at least 95% of assets in the securities of its underlying index and in ADRs based on the securities in its underlying index. It uses a representative sampling strategy to try to track the index. The index consists of stocks traded primarily on the London Stock Exchange. It is nondiversified.

TOP 10 HOLDINGS ( 49.14% OF TOTAL ASSETS)  
 
Company Symbol % Assets
ASTRAZENECA PLC ADS (AZN) 3.13
BHP BILLITON (BLT.L) 2.86
BP Plc N/A 8.47
BRITISH AMERICAN TOBACCO PLC (BATS) 3.06
GlaxoSmithKline PLC N/A 5.12
HSBC HOLDINGS PLC (HSBA) 9.21
RIO TINTO (RIO.L) 2.91
ROYAL DUTCH SHELL PLC-A SHS (RDSA) 5.06
ROYAL DUTCH SHELL PLC-B SHS (RDSB) 3.74
Vodafone Group PLC N/A 5.58

Chart for iShares MSCI United Kingdom Index (EWU)

 

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