iShares MSCI Australia ETF

EWA

Market cap $1.43B

The iShares MSCI Australia ETF is heavily weighted toward financials (42%) and materials (24%), primarily Commonwealth Bank and BHP. EWA's financial sector faces headwinds from a flattening yield curve, rising funding costs, and highly leveraged Australian households amid rate hikes. Materials exposure is mixed: copper benefits from electrification trends, but iron ore faces demand risks from China's tepid growth and geopolitical tensions.

The data highlights that inflation remains a thorn in the side of the central bank, and that an increase in interest rates is highly likely to be repeated in coming months.

The S&P 500 is off to a dismal start in 2026, lagging most developed-market indexes as investors pull back from U.S. tech stocks with elevated valuations.

Australia's central bank raised its policy rate by 25 basis points to 3.85%. That marked the Reserve Bank of Australia's first rate hike since November 2023.

The iShares MSCI Australia ETF, which has generated respectable returns of 14% over the past year, is still lagging other developed markets and global stocks in a big way. EWA's heavy exposure to financials and materials shapes its outlook; banks face headwinds from likely rate hikes, although payouts could remain steady, while materials benefit from robust export demand. Despite some mean reversion appeal, EWA trades at valuation premiums (19x earnings, 2.5x book) over developed markets with only 6% long-term earnings growth on offer.

The latest CPI data takes the pressure off the Reserve Bank of Australia to raise interest rates at its next policy meeting.

The Reserve Bank of Australia has warned that the rate cut path could be narrow given elevated levels of capacity utilization in the economy and an outlook that includes uncomfortably high inflation well into next year.

iShares MSCI Australia ETF offers broad exposure to large- and mid-cap Australian equities, with heavy concentration in banking and materials sectors. EWA benefits from improving Australia-China relations, structural demand for critical minerals, and a strong banking sector supported by government housing initiatives. Risks include overvaluation, potential export slowdowns in iron ore and coal, and vulnerability to housing market and geopolitical shocks.

The Reserve Bank of Australia said future policy decisions will remain dependent on the flow of economic data.

It has been 225 days since President Trump's Inauguration on January 20th, and the S&P 500 entered today up 8% since the last close before the Inauguration. Speaking of the G7, the US has been the worst market among these seven developed nations since Inauguration Day in January. Along with being the second-best performing country ETF since Inauguration Day, Vietnamhas easily been the best performer since April 8th with a gain of 77.5%.