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10 ASX ETFs for investors to watch

Exchange Traded Funds (ETFs) offer investors the opportunity to stay ahead of global events and profit from the impact of each event by investing in sectors and regions rather than just individual shares.

Source: Bloomberg

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Background to ETFs

Exchange Traded Funds (ETFs) are an increasingly popular way for investors to gain exposure to a wide variety of investments at a relatively low cost.

ETFs generally hold a particular type of shares, bonds, commodities, currencies, cryptocurrencies or futures contracts and usually reflect the price movement of their holdings. This enables investors to get exposure to particular industries (such as a financial services ETF), an index (such as the ASX200 ETF), international markets (such as a Korean shares ETF), bonds (through a bond ETF), etc.

There are approximately 258 ETFs trading on the ASX through financial services providers such as BetaShares, BlackRock, ETFS Management (AUS) Limited, State Street Global Advisors, Australia Services Limited, VanEck Investments Limited and Vanguard Investments Australia Ltd.

Given their sector specificity, ETFs provide stock investors with a convenient means to wager on the outcomes of broader macro-economic or geo-political developments, as opposed to honing down on particular stocks.

What are the best ETF funds to watch?

2024 could provide investors with a diverse range of macro-economic plays, as geopolitical turmoil in the Middle East and Eastern Europe create both uncertainty and opportunities for markets. Analysts are anticipating an end to hawkish monetary policies in many economies, following long-standing runs of rate hikes that have helped to at least quell inflation.

The following ten ETFs could be very interesting options for investors as of the month of February 2024.

1. Vanguard MSCI Index International Shares ETF (ASX: VGS)

2. Vanguard Australian Shares High Yield ETF (ASX: VHY)

3. Global X ETFs Physical Gold (ASX: GOLD)

4. BetaShares Crude Oil Index ETF - Currency Hedged (ASX: OOO)

5. Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

6. Betashares Global Uranium ETF (ASX: URNM)

7. BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ)

8. Global X ROBO Global Robotics & Automation ETF (ASX: ROBO)

9. Global X Battery Tech & Lithium ETF (ASX: ACDC)

10. SPDR S&P World ex-Australia Carbon Control Fund (ASX: WXOZ)

1. Vanguard MSCI Index International Shares ETF (ASX: VGS)

VGS is a popular ETF that provides investors with highly diversified exposure to more than 1,000 of the world's biggest listed concerns, including Amazon, Apple and Visa.

The fund is a solid pick for those investors who want to bet on the broader prospects of leading companies in OECD countries, particularly ifcentral banks and monetary authorities gradually make an exit from a hawkish cycle of rate adjustments in 2024.

2. Vanguard Australian Shares High Yield ETF (ASX: VHY)

The goal of this ETF is to acquire stakes in ASX-listed companies with higher projected dividends, to produce stronger yields for investors.

While investments that offer strong returns invariably come with higher levels of risk, the Vanguard Australian Shares High Yield ETF seeks to mitigate this risk via heightened diversification.

It currently holds around 70 shares in its portfolio, restricting investment in any single company to 10% and investment in any particular sector to 40%.

These shares thus cover a gamut of sectors, including giants such as BHP Group Ltd, Commonwealth Bank of Australia and Wesfarmers Ltd.

3. Global X ETFs Physical Gold (ASX: GOLD)

GOLD ties itself to the performance of gold via investment in physical bullion which investors can acquire directly by redeeming their units in the fund.

It is the first physical gold ETF to launch in Australia, with $2.6 billion in assets under management as of January 2023. Gold could emerge as a safeharbour pick for investors left jittery by conflicts raging in both Eastern Europe and the Middle East.

4. BetaShares Crude Oil Index ETF – Currency Hedged (OOO)

BetaShares Crude Oil ETF tracks the rise and fall in the price of crude oil against the US dollar and is hedged against currency movements, so that any changes in the value of the Australian dollar will have a limited impact on the price.

Oil prices could be on track to rise, as the global geopolitical atmosphere becomes more uncertain and renewed conflict in the Middle East compounds the impacts of the war in Ukraine.

5. Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

FTSE Asia ex Japan ETF aims to track the return of the FTSE Asia Pacific ex Japan, Australia and New Zealand Index before fees and expenses.

VAE could see a strong performance in the near-future should the Chinese economy manage to weather ongoing geopolitical tensions with the US and the woes of its largest real estate developers. Despite the impacts of troubles in the country's property sector, analysts both within and outside of China have forecast that the country's GDP growth will exceed 5% in 2024.

6. Betashares Global Uranium ETF (ASX: URNM)

URNM provides investors with a portfolio of some of the world's leading uranium companies, including Boss Energy Ltd (ASX: BOE) and Paladin Energy Ltd (ASX: PDN).

The fund could be a sound bet for investors, if the push for low-carbon power spurs the development of more nuclear energy facilities in major economies.

7. BetaShares Australian Equities Strong Bear Hedge Fund (BBOZ)

BBOZ aims to provide geared negative exposure to the Australian sharemarket at a rate of between 2% and 2.75% for each 1% change in the value of the share market.

Over time sharemarkets generally appreciate, so BBOZ doesn't make sense as a long-term investment. However, as a trading tool, BBOZ can be useful for locking in short-term gains or protecting against short-term losses.

This is particularly useful during periods of uncertainty, such as major flare-ups of regional tensions in key parts of the globe.

8. Global X ROBO Global Robotics & Automation ETF (ASX: ROBO)

ROBO holds shares in companies that potentially stand to benefit from increased adoption and utilisation of robotics and artificial intelligence.

The pandemic and subsequent health response demonstrated the importance for countries to maintain the onshore production of critical goods.

According to a survey conducted by management consulting firm AT Kearney, 79 percent of executives who have manufacturing operations in China have either already moved part of their operations to the United States or plan to do so in the next three years, and another 15 percent are mulling similar moves.

For manufacturing to be competitive in the US, companies are going to have to spend billions on robotics and automation.

9. Global X Battery Tech & Lithium ETF (ASX: ACDC)

ACDC invests in companies throughout the lithium cycle from mining and refining to battery production.This gives exposure to the industry rather than just to mining, which removes some of the volatility caused by lithium prices.

The fund could see a strong performance on the back of the rapidly increasing uptake of electric vehicles in countries around the world, due to concerns over the impacts of climate change.

The International Energy Agency (IEA) estimates that EV sales hit 14 million by the end of 2023, for a 35% year-on-year increase. Electric cars likely accounted for 18% of total car sales across the full calendar year.

10. SPDR S&P World ex-Australia Carbon Control Fund (WXOZ)

WXOZ seeks to closely track the S&P Developed Ex-Australia Large Mid-cap Carbon Control Index, by holding shares in companies that have the lowest carbon emissions per unit of revenue.

Its portfolio consits primarily of US-based companies, with top holdings including Apple, Microsoft, Amazon and Alphabet (Google).

WXOZ makes the list because it has diversified holdings of the largest companies least affected by high energy prices, putting it in good stead to weather any ongoing geopolitical disruptions.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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