Access global growth locally

“The British East India Company’s ships flew an ensign incorporating the Union Jack. Today corporate nationality is harder to determine.” – The Economist May 2014. Australian companies are increasingly becoming more global. You can now give your portfolio this advantage.

“The British East India Company’s ships flew an ensign incorporating the Union Jack. Today corporate nationality is harder to determine.” – The Economist May 2014

 

The same is true for a growing number of Australian companies.  The success of many companies listed on the ASX is inexorably linked to global macro factors.  As such geographic diversification of revenue is as important as sector and stock diversification.  The good news is that it is possible to be exposed to global themes by investing locally.

Everyone who has ever looked for a job in Australia probably knows seek.com.au. But an investment in Seek Limited is an investment in global growth.

Most of us who have ever had pathology tests in Australia would have seen Sonic Healthcare’s logo on their paperwork.  It’s our largest pathology company.  But an investment in Sonic is an investment in a global business.

Over 50% of Seek’s revenue is derived from Asia plus it has businesses in Mexico, Brazil and Africa.  Through acquisition and corporate activity, Sonic Healthcare is the third largest pathology company in the US plus it has companies in the UK, Germany, Switzerland and Belgium.  Seek and Sonic are Australian companies that have diversified geographically and offer a way for Australian investors to do so as well.

Having a well-diversified Australian equity portfolio will allow investors to benefit from global macro themes.  If the value of the Australian dollar falls, then hypothetically Sonic’s revenue from its US operations will be worth more in Australian dollars.  If the economies of Asia grow then Seek may be ideally placed to benefit from increased labour growth in the region.

It’s a big wide world and global expansion is a risky exercise. But that’s how investors make money. You hold a portfolio of different risks across different stocks, different sectors and different geographies.  You diversify to get the upside of being a risk-taker with reduced downside.

Investing in Australian companies that have a global presence is the easy way for Australian investors to get another dimension of diversification. This way you do not have to manage foreign currency risks and you do not have to deal with the difficulties and timing of overseas stock exchanges. 

An easy and effective way to have access to global growth is via a well-diversified portfolio. The Market Vectors Australian Equal Weight ETF (ASX: MVW) is three times more diversified than the S&P/ASX 200 Index (ASX 200) (as measured by the Herfindahl index[1]). This diversification extends beyond stock and sector to geographic earnings as well. MVW tracks the Market Vectors Australia Equal Weight Index (MVW Index). Because of MVW Index’s equal weight methodology, MVW has more exposure to the Seeks and Sonics of the market than you will get with a typical ASX200 tracking fund. Here are some examples:


 

 

Company                                                         Local Revenue         Offshore revenue

SEEK

CYTD Growth

19.19%

Dividend Yield

1.57%

Global Presence

Asia, Africa, South America

 

 

Exposure

MVW Index

ASX 200

Difference

 

 

1.29%

0.40%

0.89%

 

Sonic Healthcare

CYTD Growth

6.15%

Dividend Yield

3.63%

Global Presence

USA, UK, Germany, Switzerland and Belgium

 

Exposure

MVW Index

ASX 200

Difference

 

1.35%

0.50%

0.85%

Incitec Pivot

 

 

 

CYTD Growth

9.59%

Dividend Yield

3.11%

Global Presence

North America, Europe

 

Exposure

MVW Index

ASX 200

Difference

 

1.42%

0.35%

1.07%

Orica

 

 

 

CYTD Growth

-16.70%

Dividend Yield

4.59%

Global Presence

Asia Pacific, Latin America, North America, Europe

 

Exposure

MVW Index

ASX 200

Difference

 

1.44%

0.57%

0.87%

Recall Holdings

 

 

 

CYTD Growth

17.73%

Dividend Yield

N/A

Global Presence

North America, South America, Europe

 

Exposure

MVW Index

ASX 200

Difference

 

1.40%

0.12%

1.28%

            

Source: Market Vectors, Bloomberg, CYTD 1 Jan 2014 to 30 June 2014.  Dividend yields as at 17 July 2014

MVWis the only equal weight ETF in Australia and holds a portfolio of 74 of the largest and most liquid securities on the ASX. It is an easy and cost-effective way to invest locally and get a portfolio with global revenue exposure in a single trade.

MVW is available to buy on the ASX.

If you would like to speak to one of our ETF specialists email us at info@marketvectors.com.au or call 02 8038 3000

 

Important Notice: This information is issued by Market Vectors Investments Limited ABN 22 146 596 116 AFSL 416755 as responsible entity and issuer of Market Vectors Australian Equal Weight ETF (MVW) (‘Market Vectors’) and is general in nature and does not take into account any person’s individual objectives, financial situation or needs (‘circumstances’). Before making an investment decision you should read the product disclosure statement (PDS) and consider if the decision is appropriate for your circumstances. A copy of the PDS is available at www.marketvectors.com.au or by calling the registry on 1300 MV ETFS (1300 68 3837).

MVW is subject to investment risk, including possible delays in repayment and loss of capital invested. No member of the Van Eck Global group guarantees the repayment of capital, the performance, or any particular rate of return from MVW.

The Market Vectors Australia Equal Weight Index (‘Index’) is the exclusive property of MVIS. MVIS has contracted with Solactive AG (“Solactive”) to maintain and calculate the Index. Neither MVIS nor Solactive sponsor, endorse or sell any financial products to which MVIS licenses the Index. MVIS and Solactive make no representation regarding the advisability of investing in any financial products based on MVIS’ indices. Solactive uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MVIS, Solactive has no obligation to point out errors in the Index to third parties.

MVIS and MVIL are wholly owned subsidiaries of Van Eck Associates Corporation based in New York (‘Van Eck Global’).

Market Vectors® and Van Eck® are registered trademarks of Van Eck Global.

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