In biblical parlance, a rough interpretation of the Garden of
Eden is that it is a highly desirable place to be. For investors
looking for long exposure to Europe, finding such a destination
can be difficult. Difficult, though not impossible and one small
ETF has the potential to prove durable as investors are again
fretting over negative eurozone headlines.
With just $3.5 million in assets under management and average
daily volume of less than 11,000 shares, the iShares MSCI Denmark
Capped Investable Market Index Fund (BATS: EDEN) is the type of
ETF critics who put a lot of stock in superficial metrics such as
assets and volume would tell investors to stay away from.
Focusing on baseball card-type of statistics rather than what
is really important with Denmark could steer investors away from
a solid Nordic opportunity. While other Nordic
both diversified and country-specific plays
, have proven durable amid the eurozone's ongoing woes, EDEN has
an unheralded advantage over its Norwegian and Swedish peers.
That being the peg the Danish krone has to the euro. On the
other hand, the Swedish krona and Norwegian krone are not pegged
to the euro and as investors have looked for ways non-euro
European currencies, Norway and Sweden have been two of their
favorite stopping points.
Since the height of the financial crisis in 2009, Sweden's
currency has surged 39 percent against the euro while the
Norwegian krone has gained 18 percent,
according to Bloomberg
. Those strong currencies threaten trade competitiveness and
export-related jobs in Norway and Sweden. Due to its euro peg,
Denmark has no such problems.
Denmark's krone/euro peg is not new. It has been around since
the common currency was born in 1999, but Denmark is not only
benefiting against the euro. The country is arguably irking its
Nordic rivals, too. Since the end of 2012, Denmark's krone has
lost 2.5 percent against the krona. It's down 0.7 percent against
Norway's krone, Bloomberg reported.
While the currency issue has in part contributed to EDEN's 18
percent ascent over the past year, that is not only the reason to
consider the ETF. Over the same time, EDEN has sharply outpaced
the iShares MSCI Norway Capped Investable Market Index Fund
(BATS: ENOR) and the iShares MSCI Sweden Index Fund (NYSE:
). EWD, the largest and most heavily traded ETF tracking a Nordic
nation, has trailed EDEN by more than 500 basis points over the
Another reason to consider EDEN is that Denmark, like Norway
and Sweden, is among the
dwindling number of countries with the
prestigious AAA credit rating
. France, the U.S. and the U.K., among others, can no long say
While investors, even the pros, have touted the virtues of
U.S. stocks and the leadership role those shares have played
among global equity markets, EDEN has been in better. Over the
past 90 days, EDEN has outperformed the SPDR S&P 500 (NYSE:
) by about 500 basis points.
Additionally, it should be noted that Denmark has negative
interest rates, a concept the central bank there introduced last
year, but Nationalbank has not engaged in Federal Reserve-style
asset buying. As much as fans of quantitative easing may not want
to believe, select develop markets have seen
impressive equity market appreciation without
. Denmark is one such nation.
Bottom line: A favorable currency situation, an AAA rating and
solid equity prices without QE combine to make EDEN a compelling
ETF idea for those looking for Europe exposure without heading to
For on AAA-rated nations, click
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