Franklin FTSE Australia ETF

FLAU

Market cap $76.5M

Australian ETFs like EWA draw focus as energy shocks and RBA rate hikes fuel inflation fears.

The growth data follows a monthly inflation report that showed price pressures continued to build in the Australian economy.

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

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.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.

Australia's key investment markets—stocks, bonds, and real estate—present lucrative opportunities driven by market cycles and liquidity sources. Stocks are poised for an upward breakout, likely within two years, fueled by the explosive phase of the real estate cycle. Bonds offer opportunities in both new high-yield bonds and older low-yield bonds, with potential gains when interest rates decrease.

The Franklin FTSE Australia ETF has outperformed other developed markets and Asia Pacific stocks over the past year. We highlight why FLAU, which only has around $60m of AUM, is a better product than EWA, a larger peer with an AUM of over $1.4bn. Australian macros look dicey, and FLAU's heavy exposure to banking stocks is not too ideal at this juncture.

While California and Scandinavia tend to get top billing in tech, the Land Down Under now boasts one of the fastest-growing software and fintech hubs in the world. Australia's tech industry, which expanded 80% between 2016 and 2021, is projected to reach $167 billion AUD by 2030 ($112 billion USD) as global software and fintech firms continue to spring up across the continent.