Will Low Confidence Levels Affect Germany ETFs?

Includes: EWG, GERJ
by: Tom Lydon

ETFs tracking German stocks have bounced sharply since mid-March, but the good times could give way to a pessimistic outlook as German investors reveal their low confidence in the country’s economy.

The ZEW institute’s index, a measurement of investor economic outlook for the next six months, plunged to a worse-than-expected 7.6 points in April from 14.1 in March, according to ABC News. Experts previously projected a drop to around 10, and the indicator remains below the historical average of 26.6.

ZEW believes that “the current boom doesn’t leave much room for a further improvement.” ZEW president Wolfgang Franz also remarked that there are “considerable risks” stemming from rising commodity prices, which could pressure the European Central Bank to increase interest rates.

Nevertheless, the situation has improved in Germany for the 23rd consecutive month, ING economist Carsten Brzeski commented. Brzeski notes that the doubts over the sustainability of Germany’s recovery are unjustified.

A pair of German ETFs to consider:

  • iShares MSCI Germany (NYSEARCA:EWG)
  • Market Vectors Germany Small-Cap ETF (NYSEARCA:GERJ)

Max Chen contributed to this article.

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