Morningstar - Q4 2021 - 32

Dispatches
Breakdown of European Markets by Sector
would surpass the Commonwealth Bank of
Australia CBA:AU as Australia's largest company.
Morningstar Super Sectors
Cyclical
Defensive
Sensitive
Finland
Sweden
Norway
Austria
Belgium
U.K.
Ireland
Russia
France
Hungary
Spain
Portugal
Italy
Greece
Turkey
Source: Morningstar.
As for BHP itself, Morningstar resources analyst
Mathew Hodge says the merger looks beneficial
from BHP's perspective.
and technology. Half (50.5%) of Russia's
stock market is energy companies, and financial
services and basic materials account for
another 40%.
Netherlands, which despite its size is Europe's
seventh-largest economy, is the only market
where technology reigns. It also has a significant
market share: 47.1% of the index is tech stocks,
with ASML ASML, Adyen ADYEN:NL, and
Prosus PRX:NL on top. France has a more even
split among sectors: industrials at 23.1%, consumer
cyclical at 18.6%, and healthcare at 11.1%.
This reflects its three largest stocks: LVMH MC:FR,
TotalEnergies TTE:FR, and Sanofi SNY.
Sunniva Kolostyak is a data journalist at Morningstar UK.
BHP Weighting to
Jump, Leaving
ASX ETFs Overloaded
AUSTRALIA + NEW ZEALAND
Australia
BHP Group BHP will become Australia's largest
company after announcing the unification
of its corporate structure to a single primary listing
on the Australian Securities Exchange. However,
its greater weight in the S&P/ASX 200 could
push exchange-traded funds tracking the
index to become even more concentrated in
resource shares.
Research from Morgan Stanley shows that
if BHP were to incorporate all its shares on the
ASX, BHP's index weight in the S&P/ASX
200 would jump to 11.7% from 7.2%. The miner
32
Morningstar Q4 2021
" We think BHP shareholders would not be
materially worse off, and we'd expect the deal
to go ahead, " says Hodge, who has made
no change to his AUD 41 per share fair value
estimate for BHP. Shares are trading at
about a 20% premium to that fair value estimate.
" This reflects high prices for copper and iron ore,
which we think are unlikely to sustain, " he says.
Nicki Bourlioufas is a contributor at Morningstar Australia.
Around 15% of BHP's current ownership is held by
index funds. Several ETFs track the ASX 200,
including the SPDR S&P/ASX 200 Fund, one of the
largest ETFs in Australia, and the iShares Core
S&P/ASX 200 ETF.
Denmark
Czech Republic
Germany
Netherlands
Poland
Switzerland
Brett Evans, managing director of Atlas Wealth
Management, says the changes to BHP's listing
would leave investors in an ETF tracking the S&P/
ASX 200 market even more exposed to
concentration risk. The materials sector weight
would increase to 24.1% of the S&P/ASX 200, close
to the financials sector index weight of 28.3%.
" If we look at the financials sector in Australia,
it has underperformed the ASX 200 index
over the last three years, " Evans says. " Should we
see a downturn in the materials sector,
which is highly reliant on China, then we could
see the ASX 200 sector as a whole underperform
both developed and developing markets. "
Paradigm Shift for
Thematic ETFs
Once regarded as esoteric, thematic ETFs that
exploit emerging trends are taking off in Australia.
Six out of the 11 thematic exchange-traded funds
Morningstar - Q4 2021

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