I had a question about why iShares Austria (ticker: EWO) has done so well over the last few years, writes Roger Nusbaum. I first wrote about Austria as an investment theme in November of 2004. The idea was, and is, quite simple. There are two catalysts that I see for Austria that could help the market continue to outperform.
First is that Austrian banks are financing a tremendous amount of the growth and expansion that is happening in eastern and central Europe. Manufacturing is so much cheaper in these countries than in Germany and western Europe that more of the work has to move there (in my opinion). So the Austrian banks will do a lot of the financing.
The other aspect to this is that, similar to Chile, a portion of the Austrian social security system goes into the local stock market. This creates a clear and constant steady demand for equities. This should mean good things for the local market.
Lately EWO has lagged the ATX market due to euro weakness vs the dollar, which has been a recurring theme here lately.
I also have exposure to Chile as do most clients. The economy is in good shape relative to the rest of South America and the pension money continues to buy equities.