Market Overview

Go North With Europe ETFs

Go North With Europe ETFs

Horace Greeley once said "Go West, young man," but for investors seeking some calm among the eurozone storm, going North has proven to be sage advice. Some ETFs tracking Eurozone nations have proven remarkably sturdy in 2012, but some of Europe's Northern countries have shined.

Some of the European stalwarts include Germany, the Netherlands and Norway, a trio that Russ Koesterich, iShares Global Chief Investment Strategist, reiterated with an Overweight rating on in a recent blog post.

ETFs tracking those nations have delivered for investors in 2012, with funds tracking Germany leading the way. The iShares Germany Index Fund (NYSE: EWG), the largest ETF tracking the Eurozone's largest economy, has jumped 18 percent year-to-date. Impressive, but that performance lags the returns offered by the overlooked Market Vectors Germany Small-Cap ETF (NYSE: GERJ). GERJ has surged almost 24 percent.

"Germany has been a stellar performer so far in 2012, up over 24%, roughly double the return for US equities. Stocks in the Netherlands have also posted a significant rally, up 14% so far this year, in line with a broader global benchmark," Koesterich wrote in the post.

In the case of the Netherlands, it is the eurozone's fifth-largest economy and the country has been able to do something the three nations in between itself and Germany in terms of economic heft – France, Italy and Spain – have been unable to do. That is skirt controversy and maintain the prestigious AAA credit rating.

GDP growth in the Netherlands is not spectacular as 0.75 percent growth is forecasted for 2013, but some growth is better than the contraction seen other eurozone nations. The iShares MSCI Netherlands Investable Market Index Fund (NYSE: EWN), the lone ETF devoted to the Netherlands is up 8.5 percent year-to-date. EWN has $85.3 million in assets under management..

Koesterich also holds a favorable view of Norway, a country that has drawn ample praise this year. The Norwegian investment thesis is buoyed by the country's strong balance, an under-appreciated sovereign wealth fund and the fact that it is not a eurozone member.

"Our view on Norway was driven by several factors, including its currency that's independent of the euro, strong economy, high dividend yield, and exposure to the energy sector. Since the beginning of the year, the Norwegian equities have appreciated by over 14 percent," Koesterich wrote.

Accessing Norway means investors can take part in one of the more compelling new ETF rivalries. The Global X Norway ETF (NYSE: NORW) is the oldest ETF in the pair and was joined earlier in 2012 by the iShares MSCI Norway Capped Investable Market Index Fund (NYSE: BATS).

By assets, NORW is roughly ten times larger than its new competitor and has offered superior returns over the past three months.

"Despite strong-year-to date gains, all of these markets still appear reasonably priced. All three are trading for roughly 10 times forward earnings, a significant discount to US equities. Finally, for yield hungry investors, all three of these markets are currently yielding well above three percent, and over four percent in the case of Norway," according to Koesterich.

For more on Europe ETFs, click here.


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