iShares MSCI Australia ETF

EWA

Market cap $1.33B

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%.

Australia's monthly inflation indicator jumped to its highest level in a year in July, affirming the Reserve Bank of Australia's cautious approach to cutting interest rates over recent months.

iShares MSCI Australia ETF has underperformed the EAFE Index due to heavy Materials sector exposure and ongoing industrial metals volatility. Valuation is a concern, with EWA trading at a premium P/E and a high PEG ratio despite modest long-term growth. Technical analysis shows EWA struggling below long-term resistance, with no clear bullish momentum and weak seasonal trends ahead.

Australian job advertisements fell in July, dragged down by the education and retail sectors, but that only partly offset the rise in the previous month and suggested the labour market is easing gradually.

Inflation continued to ease in the second quarter, raising bets that the Australian central bank will deliver a rate cut next month.