Asian investors should consider putting their money in European exchange traded funds (ETFs) in the oft chance the European Union’s economy, particularly Germany’s, benefit from future economic and foreign policies independent of the US' following Donald Trump’s election to presidency.
“Have a look at Europe. It’s worth looking at Europe particularly now after Trump,” says Thomas Meyer zu Drewer, managing director and global head of Comstage ETFs, Commerz Funds Solutions SA, Equity Markets & Commodities, Commerzbank AG Comstage in an interview with The Asset.
“The US markets were in record highs post election but it doesn’t necessarily mean it will stay that way because Trump will force the Europeans to go their separate way in terms of the economy, military involvement or foreign policy. The Europeans have always followed the Americans (but) that may change. There might be good chances that the European economy will further grow that’s why it’s worth looking at,” he adds.
Analysts have said Trump’s election has put the European Union-US relations at risk. It is not clear how a cooling of relations with the US will benefit EU’s or Germany’s economy. But some analysts are of the view that his election will only further hold EU nations together.
Meyer will be speaking at The Asset 2nd Asian ETF Summit today at the Conrad Centennial Singapore.
Comstage, the ETF unit of Commerzbank, has listed two ETFs in Hong Kong as it prepares to build its ETF business in Asia.
“In Asia, investors are always talking about the US because they are used to the US equity ETFs. That is another reason why we decided to come to Asia with European ETFs,” says Meyer zu Drewer.
Comstage has listed two new ETFs in Hong Kong on May 18 following a year and a half of preparation. These are the Comstage Dax ETF, an equity ETF based on the DAX blue chip stock market index of the Frankfurt Stock Exchange, and the Comstage Dividend Dax (DivDax) ETF, a smart beta ETF also based on the Dax equity index.
“The DAX is the leading share index of the thirty largest German companies on the German stock exchange. It consists of blue-chip stocks such as BASF, BMW, Daimler and SAP, representing around 80% of German market capitalization, while the DivDax offers the opportunity to invest in 15 of the DAX’s highest dividend yielding stocks. This selected index contains particularly strong companies that have delivered above average dividends,” Meyer zu Drewer says.
The ETF launch marks the first DAX ETF to be sold not only in Hong Kong, but Asia.
“As you know the German economy has grown very strongly since the global financial crisis. Commerzbank stands for Germany, it’s the second largest bank there, and it also stands for Europe. We can tell the investors where the German economy will be heading as well as what’s going on in Europe. That is our strength. That’s the reason why we come here with the Dax and the Dividend Dax ETFs. When you buy something from someone you should be asking yourself where the strength of that seller lies,” Meyer zu Drewer says.
The German economy has been one of the strongest in Europe with GDP growth rising from 0.4% in 2013 to 1.6% in 2014 and 1.7% in 2015. It grew by 0.4% in Q2 2016 and is forecast to grow by 1.9% in 2016 despite Brexit.
Prospects for the Dax equity ETF looks positive as the DAX index has gained initial support from stronger-than-expected earnings data in November, which helped underpin wider confidence in the financial sector and the DAX index as a whole.
The Dividend Dax ETF has also performed well posting returns of 3.5-4.0% in the past 10 years and provides earnings opportunities for investors in the wake of the low interest rate environment.
“For many investors the DivDax ETF is a unique chance to use equity instead of fixed income because of the low interest rates. It’s a very popular strategy in Europe,” Meyer zu Drewer adds.
