With the focus remaining on Europe and comments from the ECB
driving the markets across the globe, many investors are
reevaluating their exposure to the region. Although many are still
dialing back holdings across some of the riskiest countries in the
area, some intrepid and long-term focused investors are ratcheting
up exposure to the strong nations in the bloc, such as Germany.
The industrial powerhouse of Europe has been under pressure as
of late but many investors still think it could be a solid value.
The country has one of the lowest unemployment rates in the region,
a favorable trade balance, and a debt situation that appears to be
in check as of now (read
Germany ETFs On The Rise
Furthermore, a weak euro actually can help Germany to an extent
as it makes the country's many quality exports cheaper on the world
market making them more competitive when compared to comparable
Japanese or American goods.
Thanks to these trends, German assets in the ETF world have been
increasing at a solid rate from a year-to-date look, especially
when comparing fund flows among European nations. In fact,
, the most popular German ETF, has added about $150 million in AUM
this year while similar funds tracking France and Italy have both
added less than $50 million in the same time frame.
Yet while this suggests some optimism regarding the German
economic model, it also implies that the German funds have become
an increasingly crowded trade as of late, as more dollars move into
the famously strong nation. This situation has left some German
assets at elevated levels suggesting that some might be better off
looking beyond the country for exposure to strength in the broad
euro zone region (see
Three Great ETFs For Your IRA
Unfortunately, this is becoming increasingly difficult as more
nations appear to be in trouble or on the verge of issues at some
point in the near future. It is not just the PIIGS but many are
also starting to include the likes of Belgium and even France as
potential trouble spots down the line, suggesting that choices
beyond Germany are few and far between.
Still there are a few good choices left outside of Germany that
investors have probably overlooked but could be great picks for the
long-term. These countries, although dwarfed by the size of the
German economy, still have ETF options available that can provide
direct and diversified access to their economies.
Below, we highlight three European ETFs that track strong
countries besides Germany, giving investors a new and hopefully
less crowded way to play the in-focus space:
An often overlooked strong economy in Europe comes from the
Netherlands, one of the 20 largest economies in the world. The
country is one of the few to still have a golden "AAA" rating from
all three of the major ratings agencies and looks well positioned
in the current economic climate.
In fact, the country has lower unemployment than the EU average
while it is one of the few with a favorable current account
balance. Furthermore, many of its top exports go to strong European
nations while its relatively small size ensures that it is never
the focus in terms of countries needing to bailout the PIIGS
The main way to play the Netherlands in ETF form is via the
iShares MSCI Netherlands Index Fund (
. This ETF tracks the MSCI Netherlands Investable Market Index
which looks to give investors broad exposure to the Dutch equity
Three European ETFs That Have Held Their Ground
Currently, the product charges investors 52 basis points a year
in fees but pays out a robust yield of about 3.3%. Volume is
usually around 73,000 shares while the average bid ask ratio is
low, suggesting a low total cost for investing in this product.
The ETF holds 56 securities in total in its basket and has a
heavy focus on large cap stocks. In terms of sectors, consumer
staples takes the top spot thanks to a massive allocation to
Unilever, while industrials (17%), and financials (14%) round out
the top three.
Finland stands out as the only Scandinavian nation that uses the
euro as its currency. As a result, it is a top choice for those
looking to invest in the Scandinavian model while still remaining
in the common currency.
The country has a relatively low public debt level and has a
favorable current account balance as well. Furthermore, the nation
does a great deal of its exports with nations outside of the euro
zone or Germany, ensuring that the impact of the crisis isn't too
severe for the nation.
Lastly, the country is a very easy one to do business in as it
ranks in the top twelve from this metric according to the
the top five
from the World Economic Forum Competitiveness Survey. This suggests
that the country is well positioned to be a hub of activity and is
far friendlier to business than many of its neighbors in the region
Three European ETFs Beyond The Euro Zone
Investors now have a direct way to play Finland via ETFs thanks
to the recently launched
iShares MSCI Finland Capped Investable Market Index Fund (
. This product tracks the Finnish equity market, giving investors
broad exposure to the country's stocks.
Volume is still a little light thanks to the newness of the
product, while expenses come in at 53 basis points a year. This,
along with the more illiquid nature of the Finnish market, suggests
that total costs may be higher thanks to wider bid ask spreads.
In total, the ETF holds 45 securities in its basket with heavy
weights going to four companies; Nokia, Sampo, Kone, and Fortum.
This gives the fund a tilt towards large caps as well although
small and micro caps do account for over 20% of assets as well.
From a sector look, industrials take the top spot at 30% while
basic materials (15%) and financials (12%), and technology (12%)
round out the top four. It should also be noted that nearly 22% of
the product goes into companies in the heavy machinery segment,
suggesting that the product may have a different exposure focus
than many others in the region.
Due to the heavy banking exposure that the country has with
Hungary, Austria is often overlooked as a strong country.
Nevertheless, the fundamentals are still strong while the country
is one of the richer ones in the world from a per capita GDP
While the current account balance may not be as favorable as
others on the list, the country does a great deal of trade with
Germany, ensuring that it is heavily exposed to their robust
economy. Beyond the Germans, Vienna and Austria in general, is
often viewed as a gateway to Eastern Europe, making the area a
developed market hub for access to the quickly growing region (read
more on ETFs at the
These strengths, along with the low inflation and unemployment
in the country, are likely to outweigh some of the debt and banking
negatives that some investors may associate with Austria at this
time. Furthermore, it is important to remember that the country is
doing well from a budget perspective-acting proactively-and looks
to have a
balanced budget by 2016
and public debt less than 60% of GDP by 2020.
To target the Austrian market in ETF form, investors have had
iShares MSCI Austria Index Fund (
for quite some time. The product debuted in 1996 and gives
investors direct exposure to stocks that are based and trade in the
Currently, the product has about $55 million in AUM while
charging investors 52 basis points a year in fees. Volume is solid
at about 111,000 shares a day giving the product good bid ask
spreads while the yield is a solid 4.2% a year.
The ETF's basket currently consists of 32 securities with close
to 30% going to three firms; OMV, Erste Group Bank, and Andrtiz.
Like other funds on the list, large caps dominate the holdings list
while there is a definite tilt towards value securities.
In terms of sector exposure, industrials account for 24% while
financials (18%) and basic materials (15%) round out the top three.
For low levels of assets, utilities and technology account for just
8% in total of the product, giving the fund a tilt towards banks,
real estate, and heavy machinery firms instead.
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ISHARS-MS FNLND (EFNL): ETF Research Reports
ISHARS-GERMANY (EWG): ETF Research Reports
ISHARS-NETHERLD (EWN): ETF Research Reports
ISHARS-AUSTRIA (EWO): ETF Research Reports
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