Investors looking to participate in any rebound in the U.K. economy need look no further than the iShares MSCI UK Index (NYSE: EWU), which offers investors a broad exposure to the major sectors and companies operating in the U.K. Recently, our friends across the pond were encouraged when rating Moody's stated that the country's current AAA rating was not in jeopardy. Such a decision carries profound macroeconomic risks as there are many large institutional investors that have investing mandates that would be compromised if the U.K. loses its pristine rating. Not to mention, the country's borrowing costs would rise, hurting current holders of U.K. debt.

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A Good Play
The prime advantage of the U.K. Index ETF is that the majority of its holdings comprise businesses that are very globally diversified with broad exposure to other regions. Giant oil conglomerate Royal Dutch Shell (NYSE: RDS.A) (NYSE: RDS.B) accounts for nearly 9% of the index-weighting, as does financial giant HSBC (NYSE: HBC). Rounding up these large holdings are telecommunications company Vodafone (NASDAQ: VOD) and pharmaceutical giant Astrazeneca (NYSE: AZN). The ETF currently trades for $16.66, which is fairly close to its NAV of $16.79 per share, and yields a very respectable 3.5%.

Buyer Beware
Shares in EWU currently trade near its 52-week high of $17.20, although the P/E multiple is an attractive 13-times earnings. While the ETF does offer a broad exposure to the overall U.K. economy, financials represent over 20% of the ETF. With recent news headlines that the U.K. is taxing bank bonuses, it appears that the British government may implement new measures that could affect the future profitability and competitiveness of U.K. banks.

To Be Continued ...
For investors who simply seek broad exposure to the overall U.K. economy, EWU may be your best bet. However, as I will discuss in the future, there are other companies in various sectors that could also make for great bets in the UK. (Learn more about investing internationally, read: Going International and Broadening The Borders Of Your Portfolio.)

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