The Crisis In Greece Is Creating An Opportunity For These Single Country ETFs

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February 22, 2010 9:53pm ETF BASIC NEWS NYSE:EWI

europe“Italy has become the new focus of euro skeptics as pessimism over Europe grows. Many investors were focused on the Spanish housing and banking situation, expecting it would be


 the source of financial turbulence for the currency union, when Greece stepped into the picture and seized global attention. Over the course of a month, the euro fell from $1.45 to $1.35, but the decline has slowed recently. Greece has until March 16 to come up with a plan to cut its deficit, and this has calmed the markets for the moment. However, the pause in activity didn’t turn attention back to Spain; instead, investors have taken a deeper look at Italy. At the national level, and similar to Greece, Italy used currency swaps to help it enter into the common currency. Although Italy is not in the same fiscal situation as Greece, the parallel is still a disconcerting one,” Don Dion Reports From The Street.

Dion goes on to say, “On top of these concerns, this weekend, Columbia economics professor Robert Mundell, widely credited as laying the intellectual groundwork for the creation of a common currency, said Italy is the greatest threat to the euro. Italy has about 25% of eurozone debt, several times larger than Greece’s share, and a crisis there would be several times larger than the crisis in Greece. Together, these stories show that Italy is gaining attention in a way that it hadn’t before. It was lumped together with other troubled counties via the PIGS acronym, but Italy was in the shadow of Greece, Spain and Portugal because Italy’s situation isn’t as bleak. The country’s budget deficit is not far out of the bounds of the Maastricht Treaty, which limits annual deficits to 3%, and no one is looking for a sovereign default or a banking crisis.”

Although Italy has mostly stayed out of the headlines, investors have been punishing the iShares MSCI Italy(EWI) ETF. Over the past three months, EWI is the second worst performing Europe ETF, ahead of only iShares MSCI Spain(EWP). In terms of long-term momentum, EWI is one of the weakest international country ETFs. Going forward, EWI and EWP will be the most volatile European country ETFs in the near term. They are under pressure due to Greece’s problems and should Greece fall, one or the other will become the next nation at the center of global attention, with a weaker euro dragging returns on all European assets. On the flip side, some of this pressure is already priced into these ETFs. A positive outcome for Greece would be most bullish for EWI and EWP because negativity is already priced into shares. Over the past three months, for instance, the losses in EWI and EWP are about double those of iShares MSCI Belgium(EWK),” Dion Reports.

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Here is a closer look at the 3 ETFs mentioned in the article:

The investment (EWI) seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Italian market, as measured by the MSCI Italy index. The fund generally invests at least 90% of assets in the securities of the underlying index and in depositary receipts representing securities in the underlying index. It invests at least 80% of assets in the securities of the underlying index or in DRs representing securities in the underlying index. The index consists of stocks traded primarily on the Milan Stock Exchange. It is nondiversified.

TOP 10 HOLDINGS ( 70.99% OF TOTAL ASSETS)  
 
Company Symbol % Assets
GENERALI (G.MI) 4.79
ENEL SPA (ENEL) 9.4
ENI (ENI.MI) 18.04
FIAT (F.MI) 3.28
INTESA SANPAOLO (ISP.MI) 9.03
TELECOM ITALIA SPA (TIT) 3.57
Tenaris SA N/A 2.91
TERNA (TRN.MI) 3.93
UBI BANCA SCPA (UBI) 3.17
UniCredit N/A 12.87

Chart for iShares MSCI Italy Index (EWI)

The investment (EWP) seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Spanish markets, as measured by the MSCI Spain index. The fund generally invests at least 90% of assets in the securities of the underlying index and in depositary receipts representing securities in the underlying index. It invests at least 80% of assets in the securities of the underlying index or in DRs representing securities in the underlying index. The index consists of stocks traded primarily on the Madrid Stock Exchange. It is nondiversified.

TOP 10 HOLDINGS ( 76.34% OF TOTAL ASSETS)  
 
Company Symbol % Assets
ABERTIS INFRAESTRUCTURAS A (ABE) 3.52
ACS (ACS.MC) 2.97
Banco Bilbao Vizcaya Argentaria (BBVA) 6.67
Banco Santander Chile (SAN) 24.08
Criteria Caixacorp SA N/A 3.18
IBERDROLA (IBE) 4.68
INDITEX R (ITX.MC) 4.67
MAPFRE S.A. (MAP) 3.11
Repsol YPF SA N/A 4.62
Telefonica, S.A. (TEF) 18.84

Chart for iShares MSCI Spain Index (EWP)
The investment (EWK) seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Belgian market, as measured by the MSCI Belgium Investable Market index. The fund generally invests at least 90% of assets in the securities of the underlying index and in depositary receipts representing securities in the underlying index. It invests at least 80% of assets in the securities of the underlying index or in DRs representing securities in the underlying index. The fund is nondiversified.

TOP 10 HOLDINGS ( 71.96% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Anheuser-Busch InBev SA N/A 25.52
BELGACOM SA (BELG) 4.71
COLRUYT SA (COLR) 3.92
DELHAIZE GROUP (DELB) 6.02
FORTIS (FORA) 7.18
GROUPE BRUXELLES LAMBERT SA (GBLB) 5.93
KBC GROEP NV (KBC) 5.8
SOLVAY SA (SOLB) 4.94
UCB SA (UCB) 4.17
UMICORE (UMI) 3.77

Chart for iShares MSCI Belgium Investable Mkt Idx (EWK)

 

 

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