CHICAGO, June 29, 2012 /PRNewswire/ -- Funds in this article include: iShares MSCI Belgium Investable Market Fund (EWK), iShares MSCI United Kingdom Investable Market Fund (EWU), iShares MSCI France Investable Market Fund (EWQ). Eric Dutram looks at three nations in Europe outside of the PIIGS bloc that could see some significant trouble ahead unless they can get their fiscal houses in order.
Beyond the PIIGS, Three Troubled European ETFs to Watch written by Eric Dutram of Zacks Investment Research:
Thanks to ongoing issues in countries like Spain and Greece, the focus of many investors continues to be on the PIIGS group of nations. These five countries—Portugal, Ireland, Italy, Greece, and Spain—are often thought to be some of the weakest members in the euro zone from a financial perspective and are the least prepared to weather the current storm.
This has certainly proven to be the case as of late as a rash of bailouts and downgrades have kept this group in the spotlight and struggling to balance harsh austerity measures with growth initiatives. Meanwhile, bond yields are soaring across the entire region leading many to think that more funds will have to be deployed or that some might be forced to leave the common currency bloc in the near future (see Beyond Germany: Three European ETFs Tracking Strong Countries).
With this backdrop and the lack of consensus over Eurobonds, these nations look to stay in the limelight for a little longer, especially if events slowly deteriorate without any systemic shocks like a sudden 'Grexit'. Beyond a game-changer like that which might get rich countries with low debt to do more in the crisis, Spain, Italy, and the rest of the bunch could be in a for a rough second half of 2012.
However, while the focus might be on the PIIGS for now, the future worries could belong to a few countries in the broader European region that are very weak but are often overlooked by many market participants. All of these nations have relatively high debt-to-GDP ratios as well as unfortunate budget situations or demographic problems which could cause problems down the road for any of the three (see Three European ETFs That Have Held Their Ground).
Below, we highlight three country ETFs that follow these often overlooked markets. While any of the three may not be in deep trouble right now, they are certainly heading down a dark path and may be the next group of countries to face PIIGS-like fiscal troubles:
Belgium- iShares MSCI Belgium Investable Market Fund (EWK)
Although it may have avoided inclusion in the worst-of-the-worst, Belgium doesn't exactly have a favorable economic situation. Public debt is approaching 100% of GDP while the country also has a sizable—although not enormous—budget deficit as well.
Beyond this, the country has also had a rash of political issues, although this may be in the past. The country now holds the record for the longest time without a government in modern history, although they now have a Prime Minister (finally). Still, it shows the incredible level of gridlock that can be seen in the tiny nation of Belgium, a situation that could spell trouble if bond vigilantes turn their focus to the country.
For investors focused on Belgium, EWK represents one of the few ways to play the nation. The product tracks the MSCI Belgium Investable Market Index, giving exposure to just under 50 companies while charging 52 basis points a year in fees (See Euro Small Cap ETFs: The Way to Play Europe?).
Consumer Staples make up an outsized portion of the total assets, coming in at 35%, while financials (16%), basic materials (12%), and telecom (10%) round out the top four.
For the rest of this ETF article, please visit Zacks.com at: http://www.zacks.com/stock/news/77793/beyond-the-piigs-three-troubled-european-etfs-to-watch
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