Market Overview

Another PIIGS ETF Debuts (PGAL)

Another PIIGS ETF Debuts PGAL

Investors can now gain access to all the countries that make up the infamous PIIGS acronym.

Wednesday, the Global X FTSE Portugal 20 ETF (NYSE: PGAL) opened for trading as the first ETF to focus solely on the country. The ETF is designed to reflect the broad based equity market performance in Portugal.

The index is made up of 20 top stocks in the country with exposure to the utilities, consumer services, financials, energy and more. The top 10 holdings make up 81 percent of the portfolio with the top holding accounting for a very high 20 percent. The combination of concentrating in one country and in the top holdings make the ETF more risky than many of its single-country ETF peers. The annual expense ratio for the ETF is 0.61 percent.

Portuguese Economy

The country is still attempting to cut spending to get in line with targets set by international lenders. They intend to cut spending by 3.9 billion euros next years versus raising taxes in 2014. Since the 2011 bailout amount of 78 billion euros, the country has struggled with recession due to the austerity measures.

The silver lining may be that the country is expected to return to growth next year with a GDP gain of 0.8 percent. The country is also expected to run a government budget surplus of 3.5 percent after the aid program ends in 2014. The unemployment rate will remain high according to the estimates, at 17.7 percent.

The stock market has gained 15 percent in 2013 and is up over 40 percent since it bottomed in the summer of 2012. The country is the laggard of the PIIGS this year and investing in PGAL would be a play on a continued recover for the country in the coming years. If Portugal is able to catch up to its infamous peers PGAL could turn out to be a value play at current levels.


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