Investing in Europe – new opportunities in the old world - BetaShares

Investing in Europe – new opportunities in the old world

BY Alex Holmes | 3 November 2021
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Investing in Europe – new opportunities in the old world

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When thinking of continental Europe, images of a slow-moving, conflict-torn bloc may emerge, and investors may look elsewhere for growth opportunities. However, with the hangover of Brexit beginning to fade, a change of government in Germany and leadership on the global green agenda, opportunities may lie ahead.

As investors continue to look for areas of relative value in a global economy that has been dominated by the continuing rise of the tech titans in the U.S. and China, could globally-focused European companies provide a potential solution?

Continuing growth of European brands in China

Some of the largest companies in Europe are increasingly looking to emerging markets and finding a large portion of revenue coming from fast-growing Asian markets. China, for example, has overtaken the U.S. as Europe’s main trading partner.

China’s luxury market is still on track to become the world’s largest over the next few years, although it may experience new headwinds from the Chinese government’s goal of ‘common prosperity’. A number of European consumer brands seem well positioned to continue to benefit from the strong demand of Asian consumers.

China is winning half of the luxury world

Source: McKinsey 7 Company: China Luxury Report 2019: China Luxury report 2017.

LVMH, the world’s largest luxury goods conglomerate, whose brands include Louis Vuitton and Dior, continues to see strong sales growth in Asia in 2021, driven by Chinese consumer demand recovering strongly from the pandemic. Asia accounted for a reported 40% of the group’s revenue in 2021, up 30% from 20201.

Technology driving growth

European indices, as in Australia, traditionally have been dominated by the financial, energy, and industrial sectors, however there are several new and innovative companies, particularly in the technology sector, that have grown rapidly. Two such firms, Adyen NV (“Ayden”) and ASML Holding NV (“ASML”), have grown substantially over the past five years and are now amongst the global leaders in their respective sectors of e-commerce and chip-making equipment. Adyen has seen 1011% and AMSL 302% growth in their respective share price (total return) over the past five years to 27 October 20212.

ASML’s market valuation now stands at 287 billion euros (A$443 billlion), as at 27 October 2021, off the back of strong sales of consumer electronics in the pandemic, stockpiling in China and a global supply chain shortage of semiconductors3.

The Green agenda

The recent German elections saw Angela Merkel step down from her long tenure and a new coalition is to be formed that will likely include the Greens party, which will put climate change firmly on the agenda of arguably the most powerful state in the bloc.

Also, the EU’s ambitious ‘Green Deal’ aims to decouple economic growth from the use of resources and contains a binding commitment to achieve climate neutrality by 2050. Further regulations have been developed to define and encourage investments in sustainable projects and activities.

How to gain exposure

Investors can gain European exposure via the BetaShares Europe ETF – Currency Hedged (ASX:HEUR). HEUR’s portfolio includes the largest European companies, such as L’Oreal, Airbus and LVMH, that generate a substantial portion of their revenues from outside the Eurozone, providing investors access to a diversified portfolio of globally competitive European companies, hedged into Australian Dollars.

There are risks associated with an investment in HEUR, including market risk and country risk. For more information on the risks and other features of HEUR, please see the Product Disclosure Statement, available at www.betashares.com.au. A Target Market Determination is also available at www.betashares.com.au/target-market-determinations.


1. https://jingdaily.com/lvmh-first-half-2021-earnings-louis-vuitton/
2. End of day prices provided by Morningstar. Corporate Actions data provided by Thomson Reuters. Past performance is not an indicator of future performance.
3. https://www.reuters.com/technology/asml-q2-net-profit-jumps-38-strong-demand-computer-chips-2021-07-21/

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