As Europe continues to muddle through its debt crisis, stocks within the region continue to be hammered. Broad measures like the iShares MSCI EMU Index (ARCA:EZU) sit closer to their 52-week lows, rather than their highs. Overall, the region hasn't been an ideal investment destination over the past few months. But as nations like Spain, Portugal and Greece continue to struggle, powerhouse Germany continues to thrive. Analysts still predict that Germany will see some economic expansion throughout 2012, despite recessionary fears rising in the continent. The recent rout in German equities has given investors the perfect chance to add them to portfolios.
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Exports and Internal Growth
Europe's largest economy saw GDP growth of around 3% in 2011. This growth was not only driven by Germany's status as a leading exporter of high-engineered goods, but by internal consumption as well. Households within the nation consumed 1.5% more goods throughout the year. Unemployment remains at its lowest level since East and West Germany reunited, hovering around 5.5%.
Germany could see more of the same positives throughout the New Year. Companies within the nation expect more investment and job creation throughout the year and remain relatively "upbeat." As reported by the Financial Times, Germany's Chamber of Commerce and Industry (DIHK) recently conducted a survey about whether or not Germany could avoid recession in 2012. In the survey, the DIHK showed that one in three firms expects to increase investment over the next 12 months and that one in five firms plans to expand its workforce. More than half of the 9,000 companies surveyed also reported that their situations remained good. This prompted the DIHK to exclaim that "German companies are not dependent on just one market. In the growth regions of Asia, Latin America and also in part of eastern Europe the drivers of growth are still intact."
This fact seems to be true as exports for the engineering powerhouse rose 2.5% in December, after slumping during the fall. With the euro continuing to drift lower, the German economy has benefited in spades as its exports have become cheaper globally. As the main lynchpin in the ECB and European Monetary Union, Germany will do anything to keep the euro currency in operation. In general, analysts predict that Germany will see GDP expansion of around 0.8% throughout the year, besting the rest of Europe. In 2013, Germany's GDP is estimated to see an increase of around 1.5%. (For related reading, see What Is An Emerging Market Economy?)
Bring on the German Multinationals
With the German economy still enduring in the face of European hardship, investors may want to add exposure to the country. The easiest and broadest way to add a swath of German equities is through the iShares MSCI Germany Index (NYSE:EWG). The fund, which tracks 52 of the nation's largest firms, finished 2011 with 17.6% lost. Top holdings include industrial giant Siemens (NYSE:SI) and asset manager Allianz (OTCBB:AZSEY). While the iShares ETF allows investors to bet on the might of German exports, the Market Vectors Germany Small-Cap ETF (Nasdaq:GERJ) can be used to bet on Germany's new-found rise in domestic consumption.
While individual German ADRs are becoming harder to find for U.S. investors, there are still a few left. Software firm and Oracle (Nasdaq:ORCL) rival, SAP (NYSE:SAP) continues to expand into high-tech areas of data analytics, most recently expanding its cloud computing and smart grid operations. Similarly, on the high tech front, LED equipment manufacturer Aixtron (Nasdaq:AIXG) has seen its share price fall and now yields a juicy 4.2%
The Bottom Line
Europe is still a quagmire of debt and austerity, but Germany continues to be a bright spot in the region. Built on the back of high value-added exports and internal consumption, analysts predict the nation will escape recession and continue to grow within the New Year. For investors, adding exposure to German multinationals like BASF (OTCBB:BASFY) could be a great value in 2012. (For related reading, see 5 Other Countries Affected By A Troubled Europe.)
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