Austrian banks and other institutions are the largest investor in many former communist Central European countries such as Romania, Czech Republic, etc. Since Central European nations are closely tied to Austria both historically and culturally the Austrian cash-rich companies naturally favored them.While it seemed like a strategic move before the credit crunch began, it went horribly wrong since many of these countries’ economies were badly affected in recent times.For example, Hungary went almost bankrupt due to external debt and was bailed out by the IMF with a huge loan. The stock market in these countries also fell hard which in turn affected the Austrian companies. As a result, many of the Austrian banks such as Raiffeisenbanken, Erste Bank (EBKDY) got clobbered badly before the rebound from March lows.Since the economies of the Central Europe have stabilized, banks of Austria and other companies are looking very attractive at these levels. However for American investors the choices are very limited since all the Austrian companies trade on the OTC market. Some of the companies in the OTC market are:
1.Erste bank – EBKDY
2.Telekom Austria – TKAGY
3.OMV – OMVKY
and a few other companies. Most of them are highly illquid. Erste Bank pays a nice dividend of 3.29% and has grown over 200% from the March low of about $4+. Telecom Austria pays a dividend of 7.23% and has a $6B market cap.OMV AG is the oil and gas producer with an yield of 3.63%.The stock is still off from its 52-week high of $85.
The simple and easiest way to get exposure to Austria is to invest via the only country-specific ETF, the iShares MSCI Austria Investable market (EWO). Currently it offers a dividend of 5.70% and has $79M in assets. The expense ratio is 0.52%.
This ETF “seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Austrian market, as measured by the MSCI Austria Investable Market index.”
The ETF portfolio includes Erste bank, Telekom Austria, Verbund(utility), OMV, Raiffeisenbanken and others. Financials form about 31% of the assets.
