3 ETFs To Watch Amid Scottish Independence
As the vote on September 18 to determine Scottish independence approaches, the latest poll shows that voters are in favor of leaving Great Britain. There are several colossal impacts that could be felt in the region.
So far the biggest moves have taken place in the British pound and U.K.-based financial institutions.
The British pound on Monday morning fell to its lowest level since last November and is now down six percent from the multi-year high set in July. If a "yes" vote for independence is the winner, it is a major blow to the current government led by David Cameron.
It is important to watch the trading action this week as the polls continue to update the probability of an independent Scotland. The two big ETFs to keep an eye on are directly related to U.K. stocks and the British pound.
The iShares MSCI United Kingdom Index (ETF) (NYSE: EWU) consists of 109 large- and mid-sized companies in the UK. With uncertainty as to weather Scottish independence will become a reality, questions leading up to the election on September 18 and the ultimate result will have an effect on EWU’s holdings. The top holdings that make up EWU are HSBC Holdings plc (ADR) (7.1 percent), Royal Dutch Shell plc (ADR) (5.4 percent) and BP plc (ADR) (4.9 percent).
EWU has been fairly volatile the last 12 months and is up 3.7 percent during that time period, but is down 5.2 percent over the last six months.
Guggenheim CurrencyShares British (NYSE: FXB) tracks the performance of the British pound. FXB is up 2.7 percent over the last 12 months and is down 3.8 percent over the last six months. Its uncertain what is to become of the pound if Scotland does indeed become an independent country, but the indication thus far is that it will push down the price of the currency.
The hardest hit sector on Monday morning within the U.K. stock market was the financial stocks. The Ishares MSCI Europe Fincls Sctr Indx Fd (NASDAQ: EUFN) has 32 percent of its assets in U.K. stocks, making it the country with the largest exposure. The top holding is HSBC Holdings plc (ADR) with 10 percent of the portfolio in the large U.K.-based financial company.
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