Courtesy of the ETF Professor at Benzinga.com
MarketsMuse extends our warm wishes to all of those celebrating the Jewish New Year and extending you “L’Shanah Tovah”
Today’s piece from ETF Professor couldn’t be better timed considering the upcoming (Oct 11) European Investing & Trading Summit at London’s May Fair Hotel with a special ‘carve-out’ focused on ETF trading and liquidity across the Euro landscape.
Summit Coordinator MarketsMedia advises us at press time that the ETF trading session, hosted by WallachBeth Capital MD Andy McOrmond, is oversubscribed, but additional tix are being made available.
In theory, 2012 should have been a much darker year for ETFs tracking eurozone nations. Headlines have included speculation about Greece’s imminent departure from the eurozone, the need for a massive bailout of Spanish banks and Italy not being far behind in the bailout buffet line.
Then there are these facts. Italy is mired in a recession. Spain’s unemployment rate is over 20 percent and Greece could make the ominous switch to emerging market from developed market status.
Those are just a few of the issues Europe ETFs have had to deal with in 2012. Apparently, markets are not all that logical because while many global investors have anointed U.S. equities the toast of the developed world because the SPDR S&P 500 SPY -0.42% is up 16 percent year-to-date, some eurozone ETFs are doing quite well, too.
iShares MSCI France Index Fund EWQ -1.57%
France departed the AAA credit rating club earlier this year, but the CAC 40 Index has posted a gain of 11.2 percent year-to-date. The iShares MSCI France Index Fund has been even better with a gain of nearly 13 percent. A large part of the reason for EWQ’s good fortune is that many of its components derive the bulk of their revenue from outside the eurozone.
For example, Total TOT -1.56% and Sanofi SNY -1.40% account for about 22 percent of EWQ’s weight and neither is eurozone dependent. EWQ needs to move above $22.65 to confirm another breakout.
iShares MSCI Belgium Investable Market Index Fund EWK -0.94%
Belgium is another surprise eurozone winner this year, particularly because the country endured some ratings downgrades in late 2011. In fact, 2011 was so rough on EWK it was outperformed by the iShares MSCI Spain Index Fund EWP -2.96% and the iShares S&P Europe 350 Index Fund IEV -1.28% .
Things have not been so bad this year as the The BEL 20 Index is up almost 18 percent and EWK has surged 22.4 percent. EWK has been the perfect example of an ETF benefiting from an excessive weight to one stock when that one stock happens to be performing well. In this case, it is Anheuser-Busch InBev BUD +0.75% , which accounts for almost 23 percent of the ETF’s weight, that is driving the fund’s performance.
iShares MSCI Netherlands Investable Market Index Fund EWN -1.34%
The iShares MSCI Netherlands Investable Market Index Fund is the “slacker” of this group with a year-to-date gain of 11.4 percent. At least the Netherlands has been able to hold on to its AAA rating and the country has provided investors a steady outlet among the European storm. The Eurozone’s fifth-largest economy grew by just 0.2 percent in the second quarter, the same growth rate as in the first quarter, but 0.2 percent growth is not horrible when other economies in the region are contracting.
In 2013, growth should tick higher to 0.75 percent while the budget deficit contracts, the Wall Street Journal reported.
EWN’s 36 percent weight to consumer staples stocks gives the ETF a conservative feeling, though it is worth noting the ETF has outperformed its largest holding, staples giant Unilever UN -0.40% . EWN’s beta against the S&P 500 is 1.4, so do not expect a U.S. utilities ETF with this fund.