Coming off a surprisingly strong performance in 2012, European
equities, broadly speaking, still sport favorable valuations and
are showing the potential to deliver solid returns this year. On
that note, S&P Capital IQ Chief European Equity Strategist
Robert Quinn says European bourses have the potential to deliver
returns in the high single digits this year.
Regarding specific eurozone nations and the corresponding
, investors face an array of choices and risks. For example, some
investors might be apt to say the iShares MSCI Spain Index Fund
) and Spanish equities are cheap for a reason and the reason is
German stocks and ETFs such as the iShares MSCI Germany Index
) and the Market Vectors Germany Small-Cap ETF (NYSE:
) have been impressive, steady performers.
Additionally, some investors see
opportunity in Italy
with the iShares MSCI Index Fund (NYSE:
) on the basis that the worst news affecting Italian stocks has
already been priced in.
In a new research note, S&P Capital IQ highlights three
factors that could affect European equities this year and next
year: The banking system, public policy and household
"Funding markets have opened up and a return to an estimated
4% global GDP growth rate in 2014 (from 2.5% currently) is not
unreasonable to S&P Capital IQ and would likely have a
material positive impact on consensus EPS revisions for the
European banking industry," the research firm said in the
S&P Capital IQ put the spotlight on two ETFs investors can
use to gain exposure to an ongoing recovery in European stocks.
The firm rates the $1.3 billion iShares S&P Europe 350 Index
) Marketweight, noting that five of the ETF's top-10 holdings
earn Buy or Strong Buy ratings from S&P analysts.
Home to 355 stocks, IEV is not as intimately levered to a
eurozone recovery as its name implies. Alone, the U.K. accounts
for 34 percent of the fund's weight. Non-eurozone nations
Switzerland and Sweden combine for another 18 percent. However,
IEV does offer exposure to a possible bounce in European bank
names as that sector is the ETF's largest with an allocation of
over 20 percent.
IEV's top-10 holdings include Nestle (OTC:
), HSBC (NYSE:
), BP (NYSE:
), Royal Dutch Shell (NYSE: RDS-A) and Total (NYSE:
). With a trailing 12-month yield of almost 3.1 percent, IEV has
gained over 10 percent in the past 90 days.
S&P Capital IQ is even more enthusiastic about the SPDR
EURO STOXX 50 ETF (NYSE:
), which the firm rates Overweight. With almost $1.5 billion in
AUM, FEZ is less expensive than IEV with annual fees of 0.29
percent compared to 0.6 percent for IEV.
At the country level, FEZ offers a stark contrast to IEV as
France and Germany combine for nearly two-thirds of the former's
weight. Spain and Italy combine for another 21 percent of FEZ's
weight. FEZ is also heavier on banking stocks as that sector
garners a 25.7 allocation.
Following financials, there is some balance between weights to
consumer staples, health care, industrials, energy and
discretionary names. Total, Sanofi (NYSE:
) and Banco Santander (NYSE:
) are found among the ETF's top-10 holdings.
FEZ has a 30-day SEC yield of 2.61 percent and has returned
12.5 percent in the past 90 days.
For more on Europe ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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