The U.S. economy is showing improvements with solid retail and
labor data which are suggesting that the consumer is back on
track. However, investors are also growing concerned about the
possibility of imminent tapering of bond purchase by the Fed.
This has kept many sectors, including the safe havens
like REITs and utilities, under stress and compelled investors to
focus on different sectors that haven't seen as big of a run
In particular, there are plenty of other developed
nations-especially in Europe-- that have actually held up
strongly this year. These markets may often be overlooked, but
are clearly capable of big gains and provide diversification
Three Country ETFs Struggling in 2013
So, for investors seeking foreign plays that are doing well in
this market environment, a closer look at any of the following
could be a great choice. These funds not only managed to stay
profitable but have delivered double-digit returns so far in the
year. These could make for an interesting trade heading into the
second half of 2013.
The Irish economy is showing improvement this year and is
gradually recovering from the 2008 crisis thanks to the ongoing
fiscal consolidation, reviving domestic demand, and signs of
recovery in the banking sector.
These fundamentals suggest that the nation would smoothly exit
its bailout program at the end of this year and reflect a
political stability and reputation for the country. However, the
public debt of Ireland, currently standing at 117% of GDP, is
still a major concern. High unemployment rates are also adding to
the negative economic sentiment (read:
Avoid These 3 Eurozone ETFs This Summer
Investors should note that Ireland is rapidly trying to emerge
as a stronger nation among the other PIIGS members. The nation is
expected to post the third highest GDP growth in the Eurozone
this year and in the next. The IMF projects Ireland's economy to
grow 1.1% this year, 2.2% next year and 2.7% in 2015.
Given the improving trends, Irish market performance has been
quite impressive so far this year, not only when compared to
other high debt countries but also when juxtaposed against strong
iShares MSCI Ireland Capped Investable Market Index Fund
, which tracks the MSCI Ireland Investable Market 25/50 Index,
has added roughly 18.8% year-to-date, easily outpacing the other
four members of the dubious group as well as the broad Euro
region fund by wide margins.
The fund holds 21 securities in the basket, with greater
allocation going to the top 10 firms. CRH Plc, Kerry Group and
ELAN Corp hold the top three positions with a combined share of
47%. From a sector perspective, the product puts a heavy focus on
three sectors - materials, industrials and consumer staples -
each making up for at least 24% of assets.
With this focus, the fund has a tilt towards blend securities
while growth and value each make up about 23% of the product as
well. Beyond this, investors should note that the fund is well
spread out across market cap levels as large caps make up roughly
42% of assets, while small/micro cap firms comprise another
This Irish fund has amassed $57.7 million in its asset base
while charging 50 bps in fees per year from investors. In
addition, the fund involves extra cost in the form of wide
bid/ask spreads thanks to the paltry volume of trading on a daily
Denmark is still struggling to survive a recession and avoid a
housing bubble burst like the one we saw in 2008. The Euro-zone
accounts for a major portion of Denmark's exports, leading to a
possible account deficit. Also, the country lacks international
competitiveness compared to some of its robust neighbors,
suggesting that the country could lose out to others in the
Despite this, the economy appears to be recovering slowly as
it entered into a growth territory in the first quarter,
expanding 0.2% on consumer spending.
The country has stable employment levels and healthy public
finances, which would keep the interest rates down. Also, the
inflation rate remains low. Further, the Nordic region enjoys
ample foreign-exchange reserves and a favorable public debt
Nordic ETF Investing 101
Based on these strong fundamentals, the Danish economy
continues to outpace Southern European nations. According to IMF,
the economy would grow 0.8% this year and 1.7% in the next.
As such, investors seeking exposure to the Danish market could
iShares MSCI Denmark Capped Investable Market Index Fund
an exciting pick. The fund is up nearly 13.80% this year, clearly
beating the other European ETFs by wide margins.
The Danish ETF seeks to match the price and yield performance
of the MSCI Denmark IMI 25/50 Index, before fees and expenses.
The index uses a capping methodology to limit the weight of any
single component to a maximum of 25% of the index.
Holding 38 securities in its basket, the product does not
offer a huge level of diversification to investors, as it
allocates nearly 63% of the assets in the top 10 holdings. Novo
Nordisk constitutes the top spot in the basket with the largest
share at 21.7% while the next two spots -Danske Bank and
Carlsberg - make for a combined 14% share (see more in the
From a sector look, the fund is skewed towards the healthcare
sector with 38.56% share, followed by industrials and financials.
It provides broad exposure to multi cap Danish stocks. While
large companies account for about 57% of the assets, mid and
small cap take the rest of the portion in the basket.
EDEN is unpopular with just $3.6 million in AUM and 10,000
shares in daily average trading volume. It charges slightly high
fees of 53 bps per year from investors.
Switzerland is considered one of the most stable countries in
Europe and relatively unique among the world's major developed
economies. The Swiss economy is relatively sound, especially when
compared to neighboring economies. Public debt is at a manageable
level, credit ratings are still AAA, and the nation often runs a
The unemployment rate of the nation is also much lower than
the neighboring economies, suggesting that Switzerland has been
able to do better than most (read:
Switzerland ETF Investing 101
However, one issue that is linked with this region is that its
currency is pegged to the Euro. The Swiss National Bank (SNB)
intervened to peg its value against the Euro at a floor of 1.20.
The pegging led to the currency not falling beyond 1.20 thereby
making it less appreciable for American investors especially in
an environment where the euro continues to be weak.
Apart from this, Switzerland remains an intriguing choice for
investors. Those seeking to put their money in this part of
Europe can invest in
iShares MSCI Switzerland Index Fund (
. The performance of the fund has been quite remarkable despite
the rising turbulence in the European market.
The fund is up nearly 12% and by far the most popular ETF
targeting the Swiss market, having amassed just less than a
billion in assets. The product is also relatively cost efficient,
charging 50 bps a year while trading nearly 496,000 shares a
In terms of holdings, the Swiss ETF has 40 securities in its
basket, mostly focused on the large cap space. The fund appears
to be highly concentrated in its top 10 holdings as nearly 72% of
the asset base goes towards those stocks. Nestle (
), Roche (
) and Novartis (
) make up for combined 44% share.
The fund is not diversified among the different sectors with
the top three sectors, namely, healthcare, financials and
consumer staples being assigned approximately 69% of the asset
Switzerland ETFs in Focus on China FTA Deal
Investors should note that although these funds belong to
Europe, they hold relatively well in the current turmoil and
uncertain environment. All the three ETFs currently have a Zacks
ETF Rank of 3 or 'Hold' rating (read:
Zacks ETF Rank Guide
While the Euro zone crisis remains unresolved, European
markets are still showing some sort of resilience after
relentless efforts by policymakers across the Atlantic (read:
Can This High Yielding European ETF Surge
This is especially true considering the current liquidity
environment and the European Central Bank's willingness to slash
interest rates further if required.
Thanks to these factors, events in Europe appear to be in the
'muddle through' scenario. Consequently, equities should hold up
rather well in the near term. This could potentially make the
European ETFs solid choices during these coming summer
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