Market Overview

ETFs For A Hungary Bailout (HILO, EWO)

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Hungary, an emerging economy, is having its fair share of fiscal problems much like its developed Europe counterparts. The Eastern European nation is on the brink of a credit crunch as foreign banks pull funding. The country's ratio of non-performing corporate loans stood at 17% at the end of last year and that ratio could jump by the end of next year, according to Reuters.

Hungary has the highest debt/GDP ratio, 80% in Eastern Europe. The country was downgraded to junk status by Moody's late last year. Yields on Hungarian 10-years have been as high as 9% recently and still hover above 8%. That's enough to make even Italy and Spain blush.

Still, it should be noted that Hungary is looking to negotiate a $20 billion to $26 billion bailout package and that would presumably be a good thing in the near-term for Hungarian equities. Until a Hungary ETF comes to market, investors can use the following funds to potentially benefit from a bailout of the financially challenged emerging economy.

EGShares Low Volatility Emerging Markets Dividend ETF (NYSE: HILO) We've previously been bullish on HILO due to its low beta/high dividend combination. In less than a year trading, HILO has over $59 million in AUM, indicating investors love the emerging markets/yield combination. HILO's index features a yield of 6.44%.

As a low beta ETF, it's not surprising to see almost 45% of HILO's combined sector weight allocated to telecoms and utilities. That's where the Hungary exposure comes in; a 5.1% weight to Magyar Telekom. Buy HILO because of the yield, the low beta and an almost 17% allocation to Thailand and you get the potential for a post-bailout Hungary pop.

SPDR S&P Emerging Europe ETF (NYSE: GUR) For those looking for some Eastern Europe exposure with a small Hungary kicker, GUR works. An almost 40% weight to the energy sector and a 62.2% allocation to Russia means one thing: GUR is volatile. The statistics prove that: The ETF is up 14% year-to-date, but down more than 7% in the past month. Hungary gets a weight of 3.77% here and the yield is fair at 3.27%.

iShares MSCI Austria Investable Market Index Fund (NYSE: EWO) Battered and bruised, EWO has plunged almost 32% in the past year, but hey, at least Austria still has an AAA credit rating. Austria has played a leading role in Hungary's financial system and the central European nation has shown a correlation to Hungary's own economic growth, according to Emerging Money. That makes EWO a more conservative way of indirectly playing any bounce in Hungarian equities.

For more on Hungary and ETFs, please click HERE.

Posted-In: Long Ideas News Bonds Short Ideas Dividends Specialty ETFs New ETFs Emerging Market ETFs Best of Benzinga

 

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