2014: The Year Of The Portugal ETF?
Zacks Investment Research | Jan 27, 2014 05:26AM ET
The European economy finally heaved a sigh of relief last year, with gains of about 25% for the SPDR EURO STOXX 50 (FEZ) and 20% for the SPDR STOXX Europe 50 (FEU). The main driver of this uptrend was Euro zone’s emergence from the acute debt-trap.
While all eyes remained on big names like Germany and France, investors should note that the PIIGS (Portugal, Ireland, Italy, Greece and Spain) countries, often considered the weakest members in the Euro zone, have been seeing big gains too.
Among the pack, the ETF industry had pure plays on each of the nations for quite some time except Portugal which debuted in the market just two months back in the form of FTSE Portugal 20 ETF (PGAL).
PGAL’s debut was well accepted as it added 8.05% in the last one month, performing better than the broader European fund Vanguard FTSE Europe ETF‘s (VGK) 3.74% return and SPDR S&P 500 ETF’s(SPY) return of 1.73%.
Notably, PGAL’s return breezed past a handful of single-country Euro zone ETFs in the said time-period as the ETF dedicated to Germany – iShares MSCI Germany (EWG) – added 2.75%, Global X FTSE Greece 20 ETF (GREK) gained 6.64% and iShares MSCI Italy Capped ETF (EWI) returned 7.31%. Only iShares MSCI Spain Capped ETF (EWP) became was able to beat PGAL marginally by adding 8.39%.
Why the interest in this new PIIGS ETF?
After struggling for more than two years, the Portugal economy returned to the growth path in the second quarter of 2013. Declining unemployment, a lower trade deficit and rising consumer confidence all are playing their role in pulling up the nation from the debt debacle.
The part which caught investor eyes is the improving debt picture of the once debt-ridden Portugal. The recent uptrend in PGAL can be attributed to the Portuguese government’s ability to auction $4.4 billion in bonds effectively. This was Portugal’s first sovereign major banking organizations have predicted that the limelight will be particularly on Europe in 2014 pushing aside the U.S. equities.
Amid such a bullish backdrop, risk-tolerant investors might bet on the Portugal ETF taking a cue from its all-important improved debt market and consider PGAL as a strong play this year.
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