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+ 0.02%

Irish Eyes Could Smile Again For This ETF

September 13, 2016 10:48 am
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As recently as last year, the iShares MSCI Ireland Capped ETF (iShares MSCI Irld Cp Invstb Mrkt Indx Fd (NYSE: EIRL)) was a leader among single-country Europe exchange-traded funds, posting a 2015 gain of nearly 23 percent. That was by far the best showing among the ETFs tracking PIIGS economies.

A Different Scéilín

This year is a different story, as nearly all Europe ETFs are struggling. EIRL, the lone Ireland ETF has not been immune to those woes as highlighted by a year-to-date loss of 5.7 percent. Among the PIIGS ETFs, EIRL is still easily outpacing its Greece and Italy counterparts.

The stunning Brexit decision in June only contributed to an already rough environment for EIRL and Irish stocks, which is not surprising given Ireland's vital trade relationship with Great Britain. Potentially boding well for EIRL and Irish stocks going forward is a recent spate of solid economic data out of the emerald isle.

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“Meanwhile, consumer spending also looks to have continued on an upward trajectory despite an initial hit to confidence following the surprise vote result. With the UK government set to wait until sometime in 2017 to trigger Article 50, the immediate impacts of the vote will likely dissipate over the rest of this year, but longer-term uncertainty remains,” said Markit in a recent note

Irish Resiliency

Although EIRL still labors below its pre-Brexit highs, the ETF has tacked nearly 17 percent since the Brexit decision was announced. Additional good news for the ETF comes in the form of its low allocation to financial services stocks, currently a plus when it comes to single-country Eurozone ETFs.

EIRL allocates just 7.3 percent of its weight to bank stocks, making that the ETF's seventh-largest sector allocation.

“After having eased to a near two-and-a-half year low in July, the rate of expansion in services business activity quickened fractionally in August. However, new orders rose at the weakest pace since early-2014 in a sign that companies may be operating in a more difficult environment for securing new work,” added Markit. “Construction, meanwhile, continued to record strong rises in activity and new business in August as the sector’s recovery was sustained. A special one-off question added to the August survey indicated that most customers expect Brexit to have no impact on activity over the coming year.”

EIRL is levered to those themes with a combined weight of over 37 percent to the materials and industrial sectors.

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