ETF investors have pumped more than $180 million into Austria stocks year to date, shrugging off concerns over the recent election of a nationalist.
Austria voted decisively for Sebastian Kurz and his People’s Party, taking more than 30% of the vote. Another far-right party, Freedom, gained 26% of the vote and the Social Democrats grabbed just 26.9%. Kurz is expected to form a coalition with the Freedom Party.
“I’ll fight with all my strength for change in this country,” he told supporters.
Pro-EU stance reassures investors
Kurz’s pro-EU stance means markets expect Austria’s departure from the European Union will not take place, boosting investor confidence. Austrian stocks are up more than 30% year to date and more than 3% over the past month, which covered the 15 October election. That compares to just over 11% performance year to date for European stocks as a whole.
As the country’s former foreign minister and now the country’s youngest ever leader, Kurz will be focused on stronger border controls and reduced numbers of refugees. If a coalition with anti-EU Freedom Party is struck, other leaders in Europe may find it more difficult to bring about increased integration in the euro region.
Nonetheless, European stocks have seen inflows of more than $39 billion since 1 January from global ETF investors.
Kurz’s victory comes after growing popularity for France’s Marine Le Pen, leader of Le Front National, and Geert Wilders of the Netherlands.
In Germany, the anti-immigration party Alternative for Germany secured enough votes to enable far-right politicians to sit in parliament for the first time since the Second World War, a move which was widely seen as a backlash to Angela Merkel’s handling of the refugee crisis in 2015.
Two ETF options
The US-based iShares $266 million MSCI Austria Capped ETF (EWO) costs 0.48% in annual fees. The top three sectors of the fund are financials, materials and energy, at 30.4%, 20.1% and 16.2% respectively. EWO is up more than 44% year to date, and has attracted $139 million in that period.
For a broader Europe option, the $620 million First Trust Europe AlphaDEX Fund (FEP) costs 0.80%. It has higher allocations to the UK (21.6%), Germany (14.8%) and France (13.3%). Austria is the 10th largest weighting at 3.3%. Finances, consumer cyclical stocks and industrials make up more than 63% of the exposure.