The European ETF To Play The Portugal Bailout Exit [GLOBALXFTSEPORTUGAL20ETF]

portugalThe European economy is slowly and steadily showing signs of an improved economic outlook. Business activity across the Euro zone is running at a three-year high – a clear indication that the economy’s growth is on track.

This is especially true as Markit’s composite flash Purchasing Managers Index (PMI) – which tracks both the manufacturing and service sectors of the region’s economy – came in better than expected for April. Moreover, the Euro-area consumer confidence is seeing a rising trend and the reading for April increased to the highest level in six and a half years on the back of a falling unemployment rate.

Also, many nations in the Euro zone – France, Germany, the Netherlands, Italy and Denmark – emerged out of recession last year.

In line with this trend, another European nation, Portugal, also managed to emerge from recession during the second quarter of 2013 and is now showing signs of revival. Effective implementation of structural reforms, rising consumer confidence and demand, booming exports and declining unemployment are all playing a key role in bringing the economy back to health.

Portugal in Focus 

Moreover, Portugal is expected to become the second Euro zone country, after Ireland, to successfully exit its $108 billion (€78 billion) three-year bailout program in May this year.

This speculation has been making the rounds after the country successfully managed to raise €750 million at its first regular debt auction since its bailout by the International Monetary Fund and EU in 2011 (read: Euro Zone Recovery Puts Ireland ETF in Focus).

The best part was that the auction settled for a better-than-expected yield of 3.57%, according to a report by Financial Times. Moreover, following the successful issue, Portuguese 10-year bond yields have hit a fresh eight-year low, indicating rising investor confidence. Also, the offer enjoyed a bid-to-cover ratio of 3.47 times and marked the first auction of longer-term bonds managed by the country since its bailout three years back.

Will Portugal Opt for Clean Bailout? 

With the successful sale of bonds, chances are high that the government will opt for a bailout program without a precautionary credit line from the European Stability Mechanism and would instead go for a clean exit.

This is indeed encouraging considering that only six months back many investors, as well as EU officials, were convinced that Portugal would require a second full bailout after the current program comes to an end this year.

The government is also believed to be facing pressure from the opposition Socialists who are clamoring for a clean exit.

Portugal to its credit has built up a sizable cash reserve of more than €15 billion, which is expected to keep the country fully funded for about a year after the bailout ends. This should come as a relief to investors, giving them some assurance that the country will be protected from any financial market turbulence at least for this year.

Given the recent developments, investors can keep a close eye on the Portugal ETF Global X FTSE Portugal 20 ETF (NYSEARCA:PGAL) to ride gains if any should materalize from this positive news.

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