This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Time to Consider the Land Down Under

Stocks in this article: BHPEWACMWAYBLK

"At today's meeting Aug. 6 , and taking account of recent information on prices and activity, the Board judged that a further decline in the cash rate was appropriate", Stevens elaborated.

The RBA is performing the equivalent of emergency resuscitation to Australia's major industries. This is also good news for Aussie banks that can borrow at record low rates and lend out at profitable spreads.

"It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy," the RBA's Stevens said after the last meeting.

One big sign that Australia's economy is rebounding is its trade surplus. Natural resource companies were in hyper-production mode while minerals and metals prices were down and energy prices were strong.

This helped improve the nation's export volume. Numbers released the day of the last RBA rate cut showed Australia had a $602 million trade surplus in June, the fifth month in a row of surpluses.

Aussie banks have been cutting mortgage rates, which has increased both its loan origination business and has been a boon to the housing industry. Home prices have begun to inch higher again.

Inflation was a benign 2.4% last quarter, well within the RBA's long-term target range of 2% to 3%. That's another key indicator that should empower the RBA to keep lowering interest rates.

A diversified way to invest in the Land Down Under is through iShares MSCI Australia Index ETF (EWA). EWA's biggest holdings include the Commonwealth Bank of Australia (CMWAY) representing 9.69 % of the ETF's assets.

Currently, BHP is the largest holding and reflects 9.73% of the ETF's assets. That said, the Basic Materials sectors only makes up a little more than 18% of the sector weighting while the Financial Services sector is close to a whopping 46% of the sector weighting of the ETF.

That's good news for investors because the Financial Services industry is the main beneficiary of the RBA's massive, ongoing monetary easing policies. Also, that sector tends to pay generous dividends.

This is partly why the trailing 12-month (TTM) yield for shares of EWA is a mouth-watering 6.18% as of July 30, when the share price of EWA was $23.51. Since that date the share price has risen slowly, closing on Friday at $24.08.

The five-year price chart for EWA gives us a better historical perspective for the current share price of around $24.11. The 52-week low was $22.02 and the high was $28.15.

EWA Chart EWA data by YCharts

As long as the RBA keeps cutting interest rates, blessing Australia's financial services industry and making Aussie exports competitively priced I would anticipate upside potential for shares of EWA.

Since the RBA has stated its determination to hold down rates for at least another year, consider taking an introductory position when you're ready and add more when EWA has a dip or two.

You'll be collecting a rewarding dividend yield while you're patiently waiting. For more insights into EWA, carefully study the ETF's overview.

In case you didn't know, iShares ETFs are a BlackRock (BLK) product. BLK is a publicly owned investment manager with a $46 billion market cap.

At the very least, keep an eye on the land of kangaroos, koalas and king-sized crocodiles. May it prosper and thrive while the government protects (I hope!) nature and the Great Barrier Reef, about which I recently wrote.

G'day, mate!

At the time of publication the author is long BHP and EWA.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial editor, he specializes in unique investment strategies, overlooked stock investments, energy and resource companies, precious metals, emerging growth companies, the prudent use of option strategies,real estate related opportunities,wealth preservation, money-saving offers, risk management, tax issues, as well as "the psychology of investing". Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the ┬┐herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,185.85 +211.54 1.25%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,573.3830 +24.1570 0.53%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs