Revealing the effects of the euro’s weakening against major currencies, the Deutsche Boerse has recently launched a new dollar-tracking equity index ETF. Called MSCI EMU Hedged USD, the ETF is issued by UBS, with the underlying equity index comprised of 238 stocks from Belgium, Germany, Finland, France, Ireland, Italy, the Netherlands, Austria, Portugal and Spain. The 238 companies compose nearly 85% of the free float-adjusted market capitalization of the EMU.
In the new dollar-based edition being launched, investors will continue to be able to track the popular index, like euro based MSCI EMU funds and ETFs. However, the ETF will be denominated in US dollars and, as the Deutsche Boerse explains, investors will be able to “benefit at the same time from any appreciation of the US dollar against the euro.”
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The new ETF product launch occurs as there is both foreign and domestic interest for tracking of EU stock indexes due to exchanges at record levels. In the US, the iShares MSCI EMU ETF is an unhedged dollar-denominated version of the index that trades on the NYSE. However, with declines in the euro, values of rising EU stock prices are not fully appreciated by foreign investors. As a result, the new product from the Deutsche Boerse provides an alternative for foreign and domestic investors to hedge further potential euro weakness while gaining exposure to the EMU market.