It seems that 2014 is the year for the so-called PIIGS group of
nations, outperforming other European markets. The countries -
Portugal, Ireland, Italy, Greece and Spain - were deemed as the
Euro zone's most troubled economies and are back in favor thanks to
In fact, most of the PIIGS nations are witnessing falling
government bond yields. This means investors are gaining faith in
the region's most distressed group of nations (read:
3 ETFs Crushing Eurozone Competition
Despite the huge debt burden and a high level of unemployment,
these markets are considered to be cheaper than the more stable
European economies in terms of valuations.
The PIIGS have been the best performers among Europe ETFs this
year. All the ETFs tracking the PIIGS nations have delivered
positive returns, clearly outperforming the largest and the most
popular European ETF -
FTSE Europe ETF
) - which has delivered flat-to-negative returns since the start of
the year. Excluding Spain, the PIIGS ETFs have delivered above 6%
so far this year.
As such, these ETFs are witnessing strong capital inflows and can
be a great bet over the long term. Below we have highlighted five
ETFs, each tracking a PIIGS nation, in greater detail for investors
seeking to make a bet on the space:
Portugal: Global X FTSE Portugal 20 ETF (
After facing the worst recession crisis since the 1970s, the
Portuguese economy finally managed to emerge from recession during
the second quarter of 2013 and is now showing signs of revival.
Rising consumer confidence and demand, booming exports and
declining unemployment are all playing a key role in bringing the
economy back on track.
Most importantly, the country has smartly been able to manage its
external trade balance. After having a deficit of 10% of GDP in
2010, Portugal's current account recorded a surplus of 0.5% in
2013. Its economy grew at 0.6% during the final three months of
2013, up from the 0.3% expansion witnessed during the third quarter
Moreover, the country's government has revised its
for 2014 to 1.2% from its earlier forecast of 0.8%. Also, the
jobless rate is expected to fall to 15.7% from 16.3% in 20103.
The recently launched Portugal ETF has been among the best
performing in the European equity space in the year-to-date time
frame, returning 12.2%. The fund tracks the FTSE Portugal 20 Index
and holds a small basket of 20 stocks (read:
2014: The Year of the Portugal ETF?
Energias De Portugal occupies the top spot with around 20% of the
fund's total assets, followed by Galp Energia (13.11%) and Jeronimo
Martins (10.98%). Sector-wise, the fund is heavily weighted towards
utilities (24.39%) and consumer staples (19.35%), followed by
financials. The fund charges 55 basis points as fees per year.
Italy: iShares MSCI Italy Index Fund (
In spite of the mounting debt burden and steep high unemployment,
the Italian economy managed to grow at a modest pace of 0.1% in the
last quarter of 2013.
The country's new prime minister has vowed to tackle the problem of
double-digit unemployment and has most recently announced a package
of tax cuts. These tax cuts are expected to spur investment and
consumption, thereby improving Italy's GDP.
The Italy ETF is the second best performing fund in the PIIGS group
and has retuned 8.4% so far this year. The fund manages an asset
base of $1.2 billion and tracks the MSCI Italy 25/50 Index.
ENI SPA is the only stock in the fund having double-digit
allocation. Also, the top ten stocks form 65.7% of total assets,
suggesting concentration risks. Furthermore, financials and energy
sectors alone form more than 50% of total assets, suggesting
concentrations risks on this front as well.
Ireland: iShares MSCI Ireland Capped ETF (
Ireland was the first Euro area nation to come out of the
three-year bailout program in December last year. Rising consumer
sentiment and upbeat manufacturing sector data are some of the
factors for the handsome returns from this country ETF.
Unemployment dropped to the lowest level in almost five years to
11.9% in February from 12% in January and 13.8% in the year-ago
The fund seeks to match the performance and yield of MSCI All
Ireland Capped Index. The fund holds a small basket of 24 stocks
and the top holding - Crh Plc - alone comprises a little under
one-fourth of the total fund assets. Sector-wise, materials and
consumer staples combine to make up 50% of the total fund assets.
The fund has returned 7% this year, while returning 39% in 2013.
The fund currently has a Zacks ETF Rank #2 or Buy rating,
indicating that it is expected to outperform broader markets in the
near term (read:
Buy Ireland ETF for a Green Portfolio on St
Greece: Global X FTSE Greece 20 ETF (
Strong export of goods and services enabled Greece to clock a high
current account surplus of
last year. This figure is believed to be the first recorded in
quite some time for Greece (read:
3 Country ETFs Hitting 52 Week Highs
Also, other data including retail sales, car sales, industrial
output, construction and manufacturing activity (PMI) indicate that
the economy has probably bottomed out and is expected to move out
of recession this year.
The fund seeks to give exposure to Greek stocks by tracking the
FTSE/ATHEX Custom Capped Index. The fund has returned 7% since the
start of the year and is up 39% in the past one year. The fund
currently has a Zacks ETF Rank #2 or Buy rating, indicating that it
is expected to outperform broader markets in the near term.
Spain: iShares MSCI Spain Capped ETF
The Spanish economy is expected to grow at 1.7% this year, better
than the contraction of 1.2% witnessed last year. Unemployment is
also expected to show a declining trend and is expected to fall
from 26.4% last year to 25.7% this year and to 24.6% by the end of
Spain can be played with EWP, an ETF that primarily invests in
large and mid-cap Spanish stocks. Two of its top three financial
holdings - Banco Santander and BBVA -account for 33% of its total
assets. Sector-wise, financials dominates the fund holding 47% of
The fund returned 34.26% in 2013 and is up 1.89% in the
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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
GLBL-XF PORTG20 (PGAL): ETF Research Reports
VANGD-FTSE EUR (VGK): ETF Research Reports
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