Although debt problems remain across Europe, many securities in
the region have performed quite well this year. In fact, broad ETFs
tracking the region such as
have added more than 14% YTD, while they have also outperformed the
S&P 500 in the past six months.
Worries over so-called PIIGS nations (Portugal, Ireland, Italy,
Greece, and Spain) have significantly declined, and stocks in these
nations have actually led the way higher as of late. Due to this
sudden bout of optimism and the generally bullish trend, now
appears to be a perfect time for Global X to have the debut for its
latest international ETF, this time targeting the market of
all the European ETFs here
Portugal ETF in Focus
This will actually mark the first time that an ETF issuer has
launched a single country fund targeting the relatively small
nation of Portugal. The product will trade under the name of the
FTSE Portugal 20 ETF-PGAL
, and as you might have been able to guess by the name, will hold
20 Portuguese stocks in its basket.
This index focuses on the biggest stocks in the nation (or those
that primarily derive their revenues from the country), screening
by liquidity and weighting by modified free-float market
capitalization. For this exposure, the fund will charge investors
61 basis points a year in fees (read
Play a Resurgent Europe with These ETFs
In terms of the ETF's holdings, utilities (26.2%), consumer
services (22.9%), and financials (15.5%), dominate the basket.
However, energy (14.4%) and materials (10.8%) also receive big
weights, giving the fund a relatively well spread out profile
despite the fact it only has 20 stocks in its basket.
The fund does have a bit of a concentration risk from a single
stock look though, as three companies make up at least 13.3% of
assets, including EDP at just under 20%. Still, with a heavy focus
on utilities and consumer stocks, this product may not be as
volatile as it initially appears.
How does it fit in a portfolio?
PGAL could be an interesting pick for investors who believe that
the European debt story has seen its worst days, and that better
trading is still ahead. If this is your viewpoint, then a look to a
Portugal ETF seems like a solid pick, as it could have more upside
than the larger PIIGS markets like Spain and Italy which always
seem to have better bailout prospects anyway (see
Why the PIIGS ETFs Are Outperforming
This fund may not be appropriate for investors who are worried
about Europe growing out of its debt issues, or for those who think
that the EU will need to make an example out of some of the smaller
markets. Furthermore, the country is still battling through
austerity measures, so growth could be difficult to come by in the
ETF Competition and Bottom Line
This represents the first time that U.S. investors have a product
that exclusively focuses in on the Portuguese market in ETF form.
As such, there are really no direct competitors for this product,
though this does complete the PIIGS ETF list, as the other four
nations in the group-
), Italy (
), Greece (
-already had ETFs of their own (See
Europe ETF Investing 101
The group has seen very mixed success in terms of attracting
assets, as EWI and EWP have, respectively, $850 million and $790
million in AUM, while GREK and EIRL have seen just a fraction of
that, though both are likely profitable for their issuers. EIRL has
actually cracked the $100 million under management mark, while GREK
is right behind, possessing over $90 million.
This is a pretty solid level of interest all around, and especially
so for Ireland and Greece, as both of these ETFs also target small
countries and have less than 30 securities in their baskets, much
like the new Portugal fund.
Given this, the new Portugal ETF might be able to attract a decent
following, though it will definitely require a stable Europe and
successful navigation through austerity for this product to
outperform some of its peers in the region.
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ISHARS-MS IRLND (EIRL): ETF Research Reports
ISHARS-ITALY (EWI): ETF Research Reports
ISHARS-SPAIN (EWP): ETF Research Reports
GLBL-X/F GREC20 (GREK): ETF Research Reports
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