***Sydney, Australia, November 2010***
BlackRock’s iShares business, the world’s leading provider of ETFs, experienced a 33% increase in trading volume for its international ETFs the week after the Australian dollar hit parity with the US dollar.
iShares has 19 international ETFs listed on the Australian Securities Exchange (ASX) – all are unhedged allowing investors to capitalise on the high Australian dollar and invest globally.
Tom Keenan, Director, iShares said,
“Investors are buying the iShares S&P 500 ETF (ASX: IVV) to access US large-cap stocks, as represented by the S&P 500 Index, and also take advantage of their unhedged position.
“We have also seen a broad take-up of our other iShares international ETFs into regions such as Asia as investors and investment advisers seek to diversify outside Australia at a time when the Australian dollar is riding high.
“ETFs are one of the most effective ways investors can access international markets due to their high liquidity and low cost. The listed nature of ETFs allows investors to react to changing market conditions quickly and simply. For only 0.09%, investors can access the top 500 companies in the US with one trade on the ASX.”
James Holt, Investment Specialist at BlackRock said,
“Global equities are now looking relatively cheap compared to historical highs and investors can export dollars into unhedged equities at attractive prices.
“As the world economy recovers and the Asian consumer growth story emerges and spending in that region spreads from resources to consumer goods, we expect global brands, healthcare and technology stocks to do exceptionally well. These sectors are heavily weighted in the US and in global benchmark indices, with names like Apple, Microsoft, Proctor & Gamble, Johnson & Johnson and Google – all major global companies and often selling at valuations lower than average Australian companies.”
However Holt still believes there is a strong case for domestic index fund investing, “Australia’s resilience in the face of the GFC, ongoing strength in resources and the relatively robust economy are good grounds for a degree of home bias in investors’ portfolios,” he said.
When considering the outlook for the Australian dollar, Holt said,
“If downward pressure on the US dollar continues because of fears of money-printing by the US Federal Reserve we could see the Australian dollar go higher, although it could be subject to pullbacks from time to time.
“Commodity prices are the core driver of the Australian dollar longer term, and whilst commodity prices are high, the Australian dollar is also likely to be higher. The falling US dollar and Australia’s high interest rates are also contributing factors to its stellar run.
“Longer term, if commodity prices versus imported prices return to lower levels, the Australian dollar is likely to follow them downwards. The events of 2008/09 are a reminder of how quickly things can change. When the GFC hit and commodity prices tumbled, so did the Australian dollar. Only last year it touched 62.5 cents, 36 cents below current levels. So we may have entered a period in which the currency is also more volatile, since any downturn in the global economy – which also weakens commodity prices – may also flow onto the Australian dollar.
“In the short-term, investors can take advantage of the tremendous buying power of the Australian dollar to buy global equities and international ETFs are one of the most efficient, low-cost ways to do so.” Mr Holt said.
Visit au.iShares.com for further information.
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Debbie Pearce
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Erin Taylor
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http://au.ishares.com/
