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ETFs in Focus as Germany Slips Into Recession

According to a recent published data, the German economy experienced a slight contraction in the first quarter of 2023, pushing the largest economy in Europe into a recession. This was contrary to the preliminary estimate released, which indicated that the German economy remained stagnant in Q1, barely avoiding a recession.

Below, we highlight a few ETFs with exposure to Germany that may help to navigate the uncertain conditions. These include iShares MSCI Germany ETF EWG, Global X DAX Germany ETF DAX, Franklin FTSE Germany ETF FLGR, iShares MSCI Germany Small-Cap ETF EWGS and First Trust Germany AlphaDEX Fund (FGM).

Let’s See How the Economy Actually Performed

According to an article on Reuters, the data reveals that adjusted gross domestic product (GDP) experienced a 0.3% decline in the quarter, considering price and calendar effects. This decline follows a 0.5% contraction in the fourth quarter of 2022.

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The statistics office highlights that inflation continued to pose challenges for the German economy at the beginning of the year. This was evident in a 1.2% decrease in household consumption on a quarter-on-quarter basis, after adjusting for price, seasonal and calendar factors.

In contrast, investment witnessed growth in the first three months of the year, rebounding from a sluggish performance in the latter half of 2022. Additionally, positive contributions were made by the trade sector.

Are There Any Positives?

The German economy is anticipated to experience modest growth in the second quarter, as reported in a Reuters article. This growth is expected to be driven by a recovery in the industrial sector, which will outweigh the stagnant household consumption and the decline in construction activity. However, this report came before the news that the German economy had slipped into a recession, which may change the Q2 estimates.

Later last week, Germany's prominent stock market index, the DAX, achieved a new all-time high, driven by optimism surrounding advancements in U.S. debt ceiling discussions

ETFs in Focus

iShares MSCI Germany ETF (EWG)

iShares MSCI Germany ETF tracks the MSCI Germany Index, having exposure to large and mid-sized companies in Germany. The fund has a basket of 60 securities having major allocations to industrials, financials and consumer discretionary sectors with a share of 19.39%, 16.72% and 15.95%, respectively.

The fund has gathered an asset base of $1.76 billion and charges an annual fee of 0.50%. iShares MSCI Germany ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. EWG has generated returns of 16.58% year to date and 11.40% over the past year.

Global X DAX Germany ETF (DAX)

Global X DAX Germany ETF closely tracks the performance of the DAX index with a basket of 40 securities. The fund has major allocations to industrials, financials and information technology sectors, each having a share of 24%, 17.8% and 14.2%, respectively.

With an asset base of $57.5 million, DAX charges an annual fee of 0.21%. Global X DAX Germany ETF has a Zacks ETF Rank #3 with a Medium risk outlook. The fund has earned returns of 16.29% year to date and 14.85% over the past year.

Franklin FTSE Germany ETF (FLGR)

Franklin FTSE Germany ETF tracks the performance of the FTSE Germany RIC Capped Index, giving exposure to large- and mid-sized companies in Germany. The fund has a basket of 77 securities with major allocations to industrials, financials and information technology sectors, each having a share of 19.49%, 16.7% and 15.1%, respectively.

The fund commands an asset base of $18.2 million and charges an annual fee of 0.09%. Franklin FTSE Germany ETF has a Zacks ETF Rank #3 and has generated returns of 16.98% year to date and 11.76% over the past year.

iShares MSCI Germany Small-Cap ETF (EWGS)

iShares MSCI Germany Small-Cap ETF seeks to closely track the performance of the MSCI Germany Small Cap Index. EWGS has a basket of 114 securities with major allocations to industrials, information technology and the materials sector, having a share of 26.94%, 15.37% and 13.48%, respectively.

The fund has amassed an asset base of $21.5 million and charges an annual fee of 0.59%. iShares MSCI Germany Small-Cap ETF has a Zacks ETF Rank #3 with a Medium risk outlook. EWGS has added 11.77% year to date but has fallen 5.51% over the past year.

First Trust Germany AlphaDEX Fund (FGM)

First Trust Germany AlphaDEX Fund seeks to track the performance of NASDAQ AlphaDEX Germany Index. The fund has a basket of 40 securities with major allocations to materials, consumer discretionary and industrial sectors, each having a share of 24.86%, 18.04% and 15.5%, respectively.

FGM has gathered an asset base of $15.6 million and charges an annual fee of 0.80%. First Trust Germany AlphaDEX Fund has a Zacks ETF Rank #3 with a Medium risk outlook. The fund has added 10.56% year to date and 0.11% over the past year.

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iShares MSCI Germany ETF (EWG): ETF Research Reports

Global X DAX Germany ETF (DAX): ETF Research Reports

iShares MSCI Germany Small-Cap ETF (EWGS): ETF Research Reports

First Trust Germany AlphaDEX ETF (FGM): ETF Research Reports

Franklin FTSE Germany ETF (FLGR): ETF Research Reports

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