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iShares MSCI Australia ETF

EWA:NYSE

equity ETF | passive | BlackRock | Tracks MSCI

Market Price

US$27.62 (26 Jan 2026)

+13.35% (YoY)

NAV

US$27.42

+0.73% Premium

Yield

3.20%

-11.85% (YoY)

Expense Ratio

0.50%

0% vs Avg: 0.50%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the MSCI Australia Index, providing exposure to large- and mid-capitalization Australian equities. It is a highly liquid and cost-effective way to access a diversified segment of Australia's economy, heavily weighted towards financials and materials sectors. The bull case projects continued earnings growth and potential rate cuts, while the bear case highlights concentration risks and inflation challenges.

⚖️ Risk vs Reward

The Australian equity market, as represented by EWA's holdings, trades at a P/E of 21.93x, which is above its 5-year and 10-year historical averages, suggesting current valuations are on the higher side. While recent performance has been positive, outperforming some broader international markets, the concentration in financial and materials sectors presents specific risks tied to global commodity cycles and domestic economic conditions. The potential for further growth in key sectors offers upside, but the current valuation and sector-specific headwinds create a balanced risk-reward profile, with a sensitivity to global economic shifts.

🚀 Why EWA Could Soar

• Continued strength in commodity prices (e.g., iron ore, coal) would directly benefit EWA's significant materials sector holdings, boosting earnings and share prices.
• A resilient Australian economy, supported by sustained high employment and rising wages, could drive domestic consumption and financial sector profitability.
• Potential future interest rate cuts by the Reserve Bank of Australia could stimulate economic activity and expand valuation multiples, particularly for rate-sensitive financial stocks.

⚠️ What Could Go Wrong

• A slowdown in global economic growth, particularly in China, would negatively impact demand for Australian commodities, hurting EWA's materials sector.
• High concentration in the financial sector (over 35%) exposes the ETF to risks within Australia's banking system, including potential loan defaults or tighter regulations.
• Persistent inflation or unexpected policy tightening by the RBA could dampen economic growth and corporate earnings, leading to valuation compression in the equity market.

🏢 Fund Overview

What Are You Actually Buying

The Australian equity market primarily comprises large- and mid-capitalization companies, offering investors exposure to a developed economy with strong ties to global commodity markets.
Key sectors dominating the Australian market include Financials, Materials (mining), and Healthcare, reflecting the nation's banking strength and abundant natural resources.
Australian equities are often characterized by attractive dividend yields and can offer diversification benefits for portfolios seeking international exposure, especially within the Asia-Pacific region.
The market's performance is closely linked to global economic growth, commodity cycles, and domestic interest rate policies, leading to periods of both strong growth and volatility.

Market Dynamics & Outlook

Australian stocks performed positively in 2024 but lagged the broader S&P 500, indicating a mixed environment driven by both domestic strength and global cautiousness.
The Australian economy benefits from rising labor force participation and growing wages, contributing to stable domestic demand, though inflation challenges persist.
Concentration risk in the financials and materials sectors remains a key dynamic, making the market sensitive to global commodity price fluctuations and the health of the banking system.
The outlook suggests a potentially range-bound market as tailwinds such as strong exports of natural resources contend with headwinds like anemic growth and inflation concerns.

🎯 Why This Matters

Understanding EWA's underlying market dynamics is crucial as Australia's equity landscape is heavily influenced by global commodity demand and a concentrated financial sector. This creates a unique risk-reward profile, where investors gain exposure to a developed market that can be sensitive to both global growth cycles and domestic economic policy shifts.

📈 Valuation & Analysis

Historical Performance

YTD

+4.46%

+14.12%

Yearly Growth (3Y)

+9.46%

Yearly Growth (5Y)

+6.16%

Yearly Growth (10Y)

+7.61%

Yearly Growth (Since Inception)

+7.50%

Current Valuation

The iShares MSCI Australia ETF's underlying holdings currently trade at an aggregate P/E ratio of 21.93x and a P/B ratio of 2.54x. This P/E is notably above the Australian market's 5-year historical average of 17.10x and 10-year average of 16.41x, indicating that valuations are currently on the expensive side relative to historical norms. The ETF also offers a 30-day SEC yield of 4.06%, which can be attractive for income-seeking investors. However, the elevated P/E suggests investors are paying a premium for future earnings potential, warranting a cautious approach to new investments at current levels.

The Bull Case - Upside to

Strong Global Commodity Demand

Medium Probability

Sustained high demand from major trading partners like China for Australia's natural resources (iron ore, coal, LNG) could drive a 15-20% increase in the earnings of materials companies, translating to an estimated 5-7% upside for the ETF's NAV over 12-18 months.

Resilient Domestic Economy and Consumer Spending

Medium Probability

Continued strength in Australia's labor market and wage growth could support robust consumer spending, leading to improved profitability for retail and financial sectors, potentially adding 3-5% to the ETF's NAV.

Attractive Dividend Yield and Valuation Re-rating

Low Probability

EWA's current 30-day SEC yield of 4.06% remains attractive. If global investors seek higher income and shift capital into dividend-paying markets, it could lead to a valuation re-rating, pushing NAV up by 5-10%.

The Bear Case - Downside to

Global Economic Slowdown and Commodity Price Weakness

Medium Probability

A significant slowdown in global growth could trigger a sharp decline in commodity prices, impacting the profitability of EWA's large materials holdings by 20-30%, potentially reducing the ETF's NAV by 7-10%.

Concentration Risk in Financial Sector

Medium Probability

With over 35% allocated to financials, an economic downturn leading to increased loan defaults or tighter lending conditions could severely impact banking sector earnings, leading to a 10-15% NAV decline.

Persistent Inflation and Aggressive RBA Policy

Medium Probability

If Australian inflation remains stubbornly high, forcing the Reserve Bank of Australia (RBA) to maintain or increase interest rates, it could dampen economic activity and consumer confidence, leading to a 5-8% NAV depreciation.

Risk/Reward Assessment

The iShares MSCI Australia ETF presents a balanced risk-reward profile, largely dictated by the health of the global economy and Australia's concentrated sector exposure. The bull case hinges on robust commodity demand and domestic economic resilience, offering potential upside driven by earnings growth and, possibly, valuation re-ratings. Conversely, the bear case highlights significant vulnerabilities to global economic downturns impacting commodity prices, coupled with the inherent concentration risk within Australia's financial sector and ongoing domestic inflation challenges. For investors, this implies that EWA offers targeted exposure to a developed market with income potential, but it comes with sensitivities to macroeconomic shifts that could lead to considerable volatility, suggesting a cautious approach.

Peer Comparison

• EWA provides broad exposure to the Australian equity market, focusing on large- and mid-cap companies, making it a foundational choice for single-country Australian allocation. • Its expense ratio of 0.50% is competitive among actively managed funds focusing on Australia, though some passive peers may offer lower costs, such as FLAU. • EWA benefits from substantial assets under management (US$1.27 billion), ensuring excellent liquidity and tight bid-ask spreads for efficient trading. • While offering targeted access to Australia, EWA's performance can be influenced by its significant weighting in financials and materials, a factor to consider against more diversified international equity exposures.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
iShares MSCI Australia ETF (EWA) ⭐	0.50%	US$1270.5B	14.12%	9.46%	6.16%	0.04%
Franklin FTSE Australia ETF (FLAU)	0.09%	US$116.9B	10.15%	6.27%	5.16%	0.04%
iShares MSCI Japan ETF (EWJ)	0.50%	US$13600.0B	17.58%	6.84%	6.47%	0.02%

🎯 Why This Matters

This valuation and peer analysis indicates EWA is a strong contender for Australian equity exposure due to its liquidity and established track record, though its current valuation demands careful consideration. Investors must weigh the potential for income and commodity-driven growth against sector concentration and broader market headwinds when deciding its role in their portfolio.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	CBA	C	COMMONWEALTH BANK OF AUSTRALIA	Financials	0.1%
2	BHP	B	BHP GROUP LTD	Materials	0.1%
3	WBC	W	WESTPAC BANKING CORPORATION CORP	Financials	0.1%
4	NAB	N	NATIONAL AUSTRALIA BANK LTD	Financials	0.1%
5	ANZ	A	ANZ GROUP HOLDINGS LTD	Financials	0.1%
6	WES	W	WESFARMERS LTD	Consumer Discretionary	0.0%
7	CSL	C	CSL LTD	Healthcare	0.0%
8	MQG	M	MACQUARIE GROUP LTD DEF	Financials	0.0%
9	GMG	G	GOODMAN GROUP UNITS	Real Estate	0.0%
10	RIO	R	RIO TINTO LTD	Materials	0.0%

Fund Mechanics

How It Works

The iShares MSCI Australia ETF (EWA) is a passively managed exchange-traded fund designed to track the investment results of the MSCI Australia Index. This index is market-capitalization weighted and aims to capture the performance of large- and mid-capitalization segments of the Australian equity market, covering approximately 85% of the publicly available market. The fund employs a representative sampling technique, meaning it invests in a subset of the index's securities to closely replicate the overall index's characteristics and performance, rather than holding every single component. The index is reviewed quarterly, with semi-annual reconstitutions in May and November, ensuring the ETF's holdings remain aligned with the target market segment. EWA is domiciled in the United States and offers investors a liquid and transparent way to gain targeted exposure to Australian equities. The fund also engages in securities lending, which can generate additional income, though it introduces a slight counterparty risk.

Holdings Breakdown

Number of Holdings

Top 10 Concentration

6298.0%

Top 20 Concentration

8000.0%

Turnover Rate

500%

Category	Weight	Description
Financials	36.9%
Materials	20.4%
Healthcare	9.8%
Industrials	7.5%
Consumer Discretionary	6.3%
Communication Services	5.1%
Energy	3.3%
Consumer Defensive	3.4%
Utilities	1.6%
Technology	1.5%

Cost Efficiency

Expense Ratio

0.50%

Median Bid-Ask Spread

0.040%

Metric	1 Year	3 Year	5 Year
Tracking Error	N/A	N/A	N/A
Tracking Difference	-0.62%	-0.60%	-0.53%

Expense Ratio History

Year	Expense Ratio
2025	0.50%
2024	0.50%
2023	0.50%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	14.12%	14.74%	-0.62%	19.90%	N/A	N/A
2024	0.82%	1.23%	-0.41%	N/A	N/A	N/A
2023	13.98%	14.79%	-0.81%	18.30%	N/A	N/A
2022	-5.74%	-5.25%	-0.49%	18.30%	N/A	N/A
2021	9.09%	9.41%	-0.32%	N/A	N/A	N/A

Annualized Return Since Inception

7.50%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
EWA ⭐	iShares MSCI Australia ETF	BlackRock	0.50%	US$1270.5B	14.1%	9.5%	6.2%	0.04%	0.17%	N/A	0.040%
FLAU	Franklin FTSE Australia ETF	Franklin Templeton	0.09%	US$116.9B	10.2%	6.3%	5.2%	0.04%	N/A	N/A	N/A
EWJ	iShares MSCI Japan ETF	BlackRock	0.50%	US$13600.0B	17.6%	6.8%	6.5%	0.02%	N/A	N/A	N/A
Category Average			0.36%	—	13.9%	7.5%	5.9%	0.03%	—	N/A	—

Risk Metrics

Beta

1.08

Standard Deviation

1 Year	3 Years	5 Years	10 Years
0.20%	0.17%	0.19%	0.23%

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	N/A	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	N/A

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

4,359,262

Avg Daily Dollar Volume

US$120.4M

Trend

decreasing

Bid-Ask Spread

Metric	Value
Median (Percent)	0.040%
Median (Dollar)	US$0.01
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	0.73%
30-Day Average	-0.15%
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

decreasing

Net Flows

Period	Net Flow
1 Year	US$-0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.