This ETF is no Swedish Meatball

ETF Trends

There are nearly 1,600 exchange traded products listed in the U.S., but just 18 made new 52-weeks on high Wednesday, a day when U.S. stocks surged.

One of those funds was the iShares MSCI Sweden ETF (EWD) . EWD has the honor of being the only non-India single-country ETF to make a new 52-week high Wednesday. More importantly, the $572.5 million EWD is up nearly 4% over the past month. [Sweet on the Sweden ETF]

EWD’s one-month performance is more double than that of the Vanguard FTSE Europe ETF (VGK) and better than triple the returns offered by the iShares MSCI Germany ETF (EWG) over the same period.

Often viewed as sturdy compared to some Eurozone economies, particularly the peripheral nations, Sweden’s economy and monetary policy are not without controversy. Nor is EWD without some element of volatility.

Sweden’s central bank, the Riksbank, actually raised interest rates during the global financial crisis, a move that recently earned it a written lashing from Nobel Laureate Paul Krugman. Krugrman said the Riksbank’s moves risk Japan-style deflation.

Swaps data indicate traders are widely expecting the Swedish central bank to cut rates in July to 0.5% with perhaps more cuts to follow. That could further weaken the krona, already one of the worst-performing developed market currencies this year.

Sweden’s currency is down 4% against the euro since February, but that has been a good thing for EWD. Although the ETF allocates nearly a third of its weight to the financial services sector, another third goes to Sweden’s export-laden industrial and consumer discretionary sectors.

Said another way, a weak currency probably is not a bad thing for an ETF that allocates a combined 15% of its weight to apparel retailer H&M and automotive giant Volvo. EWD has surged 9.2% since Jan. 31. [Nordic ETF Ideas]

“Swedish equities should be helped by a stable growth environment and supportive central bank policy,” said J.P. Morgan’s Jan Loeys in a note obtained by Bloomberg.

One drawback to EWD is volatility. The ETF’s beta is 1.39 with a three-year standard deviation of almost 23%, according to iShares data.

Those numbers on the iShares Europe ETF (IEV) are 1.23 and 18.6%. However, EWD has a trailing 12-month yield of 3.38% and is slightly less volatile than EWG.

iShares MSCI Sweden ETF

View photo


View Comments (0)