EWQ ETF

The developments that began in June will lead France to a chaotic political situation by the end of 2024. Uncertainty demands a premium, and the growing budget deficit makes the market price French bonds as Greek ones while the political impasse is not resolved. Despite this scenario, the valuation is not so attractive, pricing a downside of 5.7%, which supports holding the EWQ ETF.

France's economy faces challenges, but the iShares MSCI France ETF offers exposure to diverse French stocks, tracking the MSCI France Index with a 0.50% expense ratio. The ETF's top five holdings, including LVMH and TotalEnergies, make up 36% of assets, highlighting a concentrated yet diversified portfolio. Sector allocation emphasizes France's strength in industrials and luxury goods, differing from broader European funds with minimal exposure to real estate and utilities.

iShares MSCI France ETF (EWQ) is recommended as a buy due to its fair valuation and expected earnings growth in 2025. EWQ has underperformed the S&P 500 due to low technology exposure but benefits from France's improving macroeconomic environment. France's declining inflation and strengthening economy, along with a weakening U.S. dollar, are positive tailwinds for EWQ.

iShares MSCI France ETF (EWQ) has had a choppy 2024 with only low single-digit returns, underperforming both global and European stocks. Political uncertainty in France, fiscal deficit concerns, and weak economic indicators suggest caution in investing in French equities. LVMH, accounting for 11% of EWQ's portfolio, faces challenges in the luxury goods market in China, whilst it also does not appear to offer attractive earnings growth.

In the run-up to the second round vote, analysts at Citi warned that stock markets may be slightly too optimistic about the French election. Analysts at investment firm Daiwa Capital Markets also spoke of uncertainty, if no single party managed to gain an absolute majority.

Investors should avoid “hasty” portfolio changes based on predictions for upcoming elections after recent political surprises in countries including France triggered market losses, according to Principal Asset Management's Seema Shah.

Recent political turbulence in France due to the rising popularity of RN presents investment opportunity in the French stock market. The market fears potential anti-EU government in France, similar to Brexit impact on UK market. The risk of "frexit" is unlikely as not considered by RN, French economic prospects remain strong.

The iShares MSCI France ETF is a favored option for investors seeking access to prominent French companies while also benefiting from diversification and liquidity. The ETF has shown strong performance, experiencing an upward trend since the end of last year and displaying a positive "Golden Cross" pattern on the chart. Key holdings in the fund include Moët Hennessy - Louis Vuitton, TotalEnergies, Airbus, and L'Oreal, making up a substantial portion of the portfolio.

The iShares MSCI France ETF (EWQ) follows the MSCI France Index, offering exposure to a major European economy. Over the last 5 years, EWQ has delivered total returns of more than 48%, surpassing the MSCI Europe index and similar funds in the region. Despite its appealing valuation, investors should be aware of potential risks like slow European growth and geopolitical uncertainties.