PIIGS ETFs Look to Breakout
After the new Greek government assuaged fears of a write-down on debt and growing instability in the region, exchange traded funds that track once troubled PIIGS – Portugal, Ireland, Italy, Greece and Spain – could break out.
On Tuesday, the Global X FTSE Portugal 20 ETF (PGAL) rose 2.5%, iShares MSCI Italy Capped ETF(EWI) gained 3.8%, iShares MSCI Ireland Capped ETF (EIRL) added 2.5%, Global X FTSE Greece 20 ETF (GREK) surged 13.6% and iShares MSCI Spain Capped ETF (EWP) increased 3.6%.
The uncertainty surrounding the Greek election and speculation of a potential withdrawal from the union pulled on Eurozone markets at the start of the year. However, some area are making a break.
For instance, the Italian blue chip MIB Index has broken out of a downward channel, writes Michael Kahn for Barron’s.
Kahn also points out that EWI is now breaking out after rising above $14. The ETF is rebounding from a seven-month downtrend and also broke above its 50-day moving average Tuesday.
EIRL has also been forming a triangle pattern over the past two months or so and broke above its upper line Tuesday in what may be a bullish technical indicator as well. Additionally, the Ireland ETF is now back above its 50- and 200-day simple moving average.
The rest of the PIIGS have been stuck in a downtrend as well, but they are closing in on their 50-day moving averages.
Eurozone assets all strengthened Tuesday after the Greek government dropped calls for a write-down on its bailout debt, mitigating market fears of a potential fallout, reports Ryan Vlastelica for Reuters. [The Next Act in the Greek Drama]
“The market is beginning to see signs of some stability coming into oil and the Greek situation seems to be tilting towards the side of what the market is looking for, which is a retreat from its call for a debt writedown,” Andre Bakhos, managing director at Janlyn Capital LLC, said in the Reuters article.
Bolstering the Eurozone country-specific ETFs, the euro currency also appreciated against the U.S. dollar, with the CurrencyShares Euro Currency Trust (FXE) up 1.3% Tuesday. The country-specific ETFs do not hedge currency risks, so a stronger euro currency helps support U.S.-dollar-denominated returns.
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iShares MSCI Italy Capped ETF
