iShares MSCI Australia Price, Forecast, Insider, Ratings, Fundamentals & Signals

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The iShares MSCI Australia ETF offers exposure to the Australian equities market across 73 holdings, concentrated in the financials and basic materials sectors. Australia's growing strategic significance in the shifting geopolitical landscape, coupled with a solid macro foundation make it a potential investment opportunity. EWA offers diversification benefits and an attractive dividend profile, but current valuations and macro headwinds suggest a hold rating for now.

I am upgrading my outlook on the iShares MSCI Australia ETF to "buy" for a number of reasons. Gains in US markets are becoming increasingly concentrated in a few stocks, leading me to look for opportunities outside of the US market. The Australian consumer is in decent shape, and Australian banks are poised to collect high amounts of interest this calendar year.

iShares MSCI Australia ETF is rather above average in terms of expense ratios. Moreover, markets seem to broadly apply steep multiples to non-mining exposures in Australia, particularly financials. Since mining is what interests us in this ETF, we forego taking on what we think are too expensive exposures in non-mining sectors in Australia in favor of select picks.

US equities have been dominated by a handful of stocks, highlighting the need for diversification. US stocks and bonds have been positively correlated, making it challenging to hedge equity risks.

Australian stocks have underperformed this year. Unlike its developed market peers, however, Australia's rate hike cycle is far from over. Ahead of a challenging year ahead, market pricing seems far too optimistic at these levels.

While this is mostly down to less helpful base effects, international energy prices and excise duty hikes, it is not safe to conclude that the RBA rate cycle has peaked. At 5.2% YoY, the August inflation figures were bang in line with expectations.

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iShares MSCI Australia ETF has had a disappointing year, down -2% YTD compared to the positive returns of the Vanguard FTSE Developed Markets ETF. The macro backdrop for Australian equities is uncertain, with GDP growth slowing and household spending declining. The asset quality of Aussie banks will likely worsen on account of a substantial rollover of low-cost fixed rate mortgages over the next two years.

In light of Fitch Ratings' downgrade of U.S. credit, investors might be interested in identifying companies and countries that still hold the desirable 'AAA' credit rating.

Australia and Canada are experiencing a surge in population growth, while growth rates have slowed substantially in the UK due to post-Brexit frictions. The robust population growth is allowing Australia and Canada to generate stronger jobs gains without causing a tighter labor markets and strong wage growth.