It may not be the most pressing of questions, particularly since
the ETF does not track Europe's largest economy, but some investors
might be wondering if the iShares MSCI Spain Index Fund (NYSE:
) can hold up again in 2013.
In this case, "hold up" is defined as EWP only being down 2.5
percent in 2012. More impressive is the fact that the bulk of the
ETF's losses were accrued in the first half of the year.
Since late June, EWP has gained over 30 percent, putting the
lone Spain ETF just behind the iShares MSCI Germany Index Fund
) and ahead of the iShares MSCI France Index Fund (NYSE:
) and the iShares MSCI Italy Index Fund (NYSE:
Even with that rally, EWP is still sporting a dividend yield of
almost 10 percent, nearly quadruple the yield on EWG and more than
triple the yield on EWQ. Still, when looking at Spain's economic
woes, it is fair to say that EWP has either defied conventional
wisdom, is a forward-looking indicator or both.
Over the past six months, 90 days and 30 days, EWP has traded
higher despite Spain having
one of the worst jobless rates in the developed
. Spain's unemployment rate was a staggering 26.2 percent in
November, up from 25.8 percent in October.
Spain's jobless rate has held steady or increased every month
since January 2008,
according to the Washington Post
As of October, Spain's youth unemployment flirted with 53
percent. To put that number into context, joblessness among Spain's
is more than double that of their Egyptian
Potentially making matters worse for EWP in 2013 as well as
making the ETF's 2012 fortitude all the more confounding is Spain's
housing crisis. Residential real estate prices in Spain have been
tumbling for five years. Amid a soaring rate of eviction, the
government is working to freeze foreclosure for two years.
However, two more years of falling property values and the cost
to banks of maintaining foreclosed properties could hinder profits
for Sareb, Spain's so-called bad bank designed to rid Spanish banks
of troubled assets,
according to Bloomberg
That is not the best of news for an ETF that devotes 44.3
percent of its weight to bank stocks. In fact, Banco Santander
) and Banco Bilbao Vizcaya Argentaria (NYSE:
) alone combine for over 36 percent of EWP's weight.
Spain bulls, no pun intended, would point to the fact that all
of the aforementioned issues have been adequately covered by the
global media, perhaps suggesting that the market should have priced
soaring unemployment and tumbling property prices into EWP. They
might also be apt to argue that stocks and
can be forward-looking indicators.
Those points are not without a little bit of merit, but
positive, material change for the Spanish economy is unlikely to
arrive anytime soon.
That could imply EWP will not be a Europe ETF in 2013 as it was
this year. One final note for traders to consider: The open
interest in the July $27 EWP puts is
over 1,000 contracts
. That is nearly 23 times the open interest in all of the ETF's
July calls combined.
For more on ETFs, click
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.
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