There are hundreds of single-country exchange-traded funds on the market today, a large enough population that ensures some will go overlooked. Such is the plight of the iShares MSCI Finland Capped ETF (BATS: EFNL) and it is a plight the lone ETF dedicated to Finnish stocks has endured since coming to market in early 2012.
However, Finland is breaking free of the shackles of austerity, the economy there is improving and Finnish stocks are responding. EFNL is up nearly 8 percent this year, an advantage of almost 100 basis points over the comparable France and Germany ETFs.
A Nordic Nation Apart
Finland “in 2015 exited a three-year recession, which was triggered by woes for Nokia Oyj, Finland’s paper-making industry and a sanctions-induced slump in Russia, at the time among Finland’s biggest trade partners. The government is now expecting a gain in exports, boosted by major investments coming in the car, pulp and ship-building industries,” according to Bloomberg.
Finland is the only Nordic country that is a member of the eurozone. The country once carried the prestigious AAA credit rating, but lost that. However, AA+ from Standard & Poor's is still solid and all three major ratings agencies have stable outlooks on Finnish sovereign debt.
Home to just under $32 million in assets under management, EFNL is small among single-country Europe ETFs. The ETF also holds just 40 stocks and that roster is heavily concentrated. Two stocks combine for almost 30 percent of EFNL's weight. Three sectors – technology, industrials and materials — combine for over 61 percent of the Finland fund's roster.
“The government is working on new measures to boost employment, including better matching of open vacancies and the unemployed. New jobs are often popping up in the urban areas in southern and western Finland, while the bulk of the unemployed live in remote areas in the east and the Arctic north,” reported Bloomberg.
One advantage of EFNL is that it is docile. The ETF's three-year standard deviation is slightly below that of the S&P Europe 350 Index and well below that of the comparable Germany ETF. EFNL's three-year standard deviation is also 515 basis points below that of the competing Norway ETF.
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