Up about 5.5% for the week, our Australian ETF EWA gets the coveted Employee of the Week nod. Back a few weeks ago when we bought EWA we thought the best we might get was a short bump in price as proposed legislation for a special tax on mining companies was in the works. As it turns out there have been several bumps, yet the trade is at the moment in the black. A dividend of more than 3% helps defend against downturns though in most years it's an annual payout in December.
EWA's recent strong performance is a result of a successful campaign by the mining companies to beat back new government taxes specific to their industry. The proposed tax rate was dropped to 30% and modified so only iron and coal mining companies would be affected. More good news came last week when the government said that all royalty payments to state governments by iron ore and coal mining companies should be credited against federal taxes. I'll take a slight bow for thinking the original 40% tax rate proposed by the Australian government might not stand as the tax seemed onerous. Here's a link to a website showing global tax rates-- 40% is definitely steep. Incidentally, check out Singapore's tax rates--I need to reinvest in EWS at first opportunity. Or learn to use chopsticks and move there.
The financial services and basic materials sectors are EWA's biggest exposure. BHP Billiton is the largest holding at 16%, but the next four top holdings are banks. If you like Australia but not financial services, try the Australian small cap ETF KROO as it has less than 5% of assets in the financial services companies. Another option is the Aberdeen Australian Equity Fund (IAF), a closed-end fund that unfortunately now has a 4-5% premium over net asset value.
If you're thinking of going down under to check things out for yourself, first watch this little diddy.
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