Recovery in the Euro zone, which emerged from the 18-month long
recession last year, continues to stay on track to recovery. Its
economy grew at the pace of 0.3% in the last quarter of 2013, as
against 0.1% in the preceding quarter.
Consumer confidence as well as economic sentiment in the region is
picking up, indicating a brighter outlook. Two countries within the
Euro zone have already opted to exit the bailout program with
Spain's exit last month.
However, Ireland was the first Euro area nation to have been able
to come out of the three-year bailout program in December last year
Is This a Better Europe ETF?
The Irish economy is currently on a growth trajectory given ongoing
fiscal consolidation, reviving domestic demand, an improving
housing market, rising exports and a recovering banking sector.
The economy expanded 1.5% in the third quarter of 2013. As per the
European Commission, the Irish GDP will expand 0.3% in 2013, 1.7%
in 2014 and 2.5% in 2015, signaling that the country's growth is
well on course.
Though still high, the unemployment rate is exhibiting a downward
trend. The unemployment rate has fallen to 12.4% in January 2014
from 13.9% in January 2013. Also, it is expected to come down to
12.3% for the full-year 2014 and 11.7% in 2015.
Furthermore, European Central Bank's President Mario Draghi has
vowed to use all means to fight the problem of falling inflation.
It is expected to keep an accommodative monetary policy until
inflation rises to ECB's target level of just under 2% for the euro
Poland: A Better Eastern Europe ETF?
Moreover, rating agency Standard & Poor's has reaffirmed
Ireland's long-term sovereign rating as positive in December last
year. Also, the agency might raise its rating, if the Irish economy
manages to reduce its debt burden.
Given the improving fundamentals for the Irish economy, a look at
the top ranked ETF in the space could be the way to target the best
of the segment with lower levels of risk.
Top Ranked Ireland ETF in Focus
The Zacks ETF Rank provides a recommendation for the ETF in the
context of our outlook for the underlying industry, sector, style
box or asset class (read:
Zacks ETF Rank Guide
). Our proprietary methodology also takes into account the risk
preferences of investors as well.
The aim of our models is to select the best ETFs within each risk
category. We assign each ETF one of five ranks within each risk
bucket. Thus, the Zacks ETF Rank reflects the expected return of an
ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio
in the European equities space, we have taken a closer look at the
top ranked EIRL. This ETF has a Zacks ETF Rank of 2 or 'Buy' (read:
) and is detailed below.
EIRL in Focus
Launched in May 2010, the fund manages an asset base of $142.8
million and tracks the performance of the Irish equity market. The
fund seeks to match the performance and yield of MSCI All Ireland
Capped Index before fees and expenses.
EIRL holds a small basket of 24 stocks and is heavily concentrated
in its top ten holdings (73.89%). The heavy concentration is
primarily due to the fund's top holding -- Crh Plc -- which alone
comprises a little under one-fourth of the total fund assets. The
other two funds in the top three holdings are Kerry Group PLC-A
(9.59%) and Bank of Ireland (7.92%).
Sector-wise, Materials (27.8%) and Consumer Staples (22.94%)
combine to make up 50% of the total fund assets. However, the fund
also has exposure to the Industrials (22.62%), Financials (11.98%),
Healthcare (9.95%) and Consumer Discretionary (4.23%) sectors.
The fund has returned a stellar 44.72% in the last one year,
delivering the best performance among all European equities. Also,
it has added a solid 9.9% in the year-to-date time frame.
The fund charges 49 basis points as fees to investors and has a
dividend yield of 1.54%.
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ISHARS-MS IRLND (EIRL): ETF Research Reports
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