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Lets say you have $1,000 or even $10K and you want to get exposure to the whole of Western European stocks. In this case, you may want to invest in the largest European companies.

One vehicle to do that is to pick up a few shares of the DJ EURO STOXX 50 ETF with ticker FEZ.This ETF mimics the Dow Jones Euro STOXX 50 index.

What is DJ EURO STOXX 50 ETF ?
It provides a blue-chip representation of the largest companies in the Eurozone. Covers Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

As the name implies this index has the 50 largest companies in the Eurozone. It includes the the leading banks, utilities, chemical companies etc. Over 50% of the index is concentrated in German and French companies. As usual Financials have the largest representation.

What the heck is Eurozone?
Well its nothing but the zone of many countries where Euro is the currency. For eg. - UK is not in the Eurozone since Euro is not her currency. So in the Euro Stoxx 50 index there are no UK companies. If you want exposure to Europe including UK’s top companies you have to pick up
DJ STOXX 50 ETF (Note: Here you will find the term “Euro” is missing in the title). We will discuss this another time.

What are the constituents of the DJ EURO STOXX 50 ETF ?
TOTAL FINA
BANCO SANTANDER CENTRAL HISP
UNICREDITO ITALIANO SPA
BNP PARIBAS
TELEFONICA SA
E.ON AG
ALLIANZ SE-REG
NOKIA OYJ
SANOFI-AVENTIS
SIEMENS AG-REG
ING GROEP NV-CVA
BANCO BILBAO VIZCAYA ARGENTA
SOCIETE GENERALE
ENI SPA
AXA
INTESA SANPAOLO
ABN AMRO HOLDING NV
DEUTSCHE BANK AG-REGISTERED
DAIMLERCHRYSLER AG-REG
SUEZ SA
FORTIS
BASF AG
DEUTSCHE TELEKOM AG-REG
RWE AG
ASSICURAZIONI GENERALI
FRANCE TELECOM SA
VIVENDI SA
ENEL SPA
UNILEVER NV-CVA
PHILIPS ELECTRONICS NV
BAYER AG
CARREFOUR SA
SAP AG
GROUPE DANONE
ENDESA SA
COMPAGNIE DE SAINT-GOBAIN
MUENCHENER RUECKVER AG-REG
IBERDROLA SA
TELECOM ITALIA SPA
CREDIT AGRICOLE SA
AEGON NV
L’OREAL
LVMH MOET HENNESSY LOUIS VUI
ALCATEL-LUCENT
AIR LIQUIDE
ALLIED IRISH BANKS PLC
REPSOL YPF SA
RENAULT SA
LAFARGE SA
KONINKLIJKE AHOLD NV

FEZ:
This ETF has performed very well for many years now. Has groown from nearly $20 to $60+ now. Has assets of over $500 M and a decent yield.

Click here for more info: http://finance.yahoo.com/q?s=fez

How popular is DJ EURO STOXX 50 ETF ?
Europeans invest a ton of money in any product that follows this index. For example - the iShares DJ Euro STOXX 50 ETF with ticker EUE trading in the UK has an asset base of over €3.8 Billion. It is the largest ETF among iShares’s offering in the UK.

http://www.ishares.eu/fund/fund_overview.do?fundId=157496

Like the British people in France, Germany etc. invest heavily in similar funds trading in their exchanges.

written by David

One of the best ways to gain exposure to different countries in Europe is by using the Exchange Traded Funds (ETFs) for each country. iShares has 11 country based ETFs for Western Europe. These are called the iShares MSCI Series.

Out of these 11 ETFs, 9 ETFs have more than 50% of the portfolio assets in just the top 10 stocks in the portfolio. So these funds are heavily concentrated in a small number of stocks in each market. The only two funds that have less then 50% of the portfolio assets in the top 10 stocks are the iShares UK ETF - EWU and the iShares EMU Index Fund - EZU.

Among the 11 ETFs, the following have about 40-50% in Financials. While this may be a good thing for wonderful dividends and stability, it does have some risk due to the current market conditions on financials:

1. iShares Belgium ETF - EWK
2. iShares Italy ETF - EWI
3. iShares Netherlands ETF - EWN
4. iShares Spain ETF - EWP

The Austria ETF - EWO, EWP and Sweden ETF - EWD have had a average annual return of over 20% for the past 5 years. All the other ETFs have returned an average of above 10% but below 20%.

All these ETFs have a good portion of their assets invested in financials.

iShares UK ETF - EWU and ishares Germany ETF - EWG have assets of over $1B+ whereas the European Monetary Union (EMU) ETF - EMU has over nearly $3B in assets. The smallest of these ETFs is the Belgium ETF - EWK with assets of around $150M.

There are many other ETFs in the market such as those from ProShares, WisdomTree, Vanguard etc. But iShares is the market leader and is known for their innovative products such these country wise ETFs.

The other ETFs are iShares Switzerland - EWL and the ishares France fund - EWQ. Out of all these funds EWL had the least average return for the past five years.

iShares charges an expense ratio of about 0.50% on average for these funds.So if you are investor that wants exposure to European markets but do not want to take the mutual fund route, then pick up a few of these country-wise ETFs from iShares. You won’t be disappointed !!

-David
www.topforeignstocks.com

written by David