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Investors Plow Assets Into Plucky PIIGS ETFs

Europe exchange traded funds, particularly the currency hedged variety, have been all the rage this year, but this month investors have been warming to funds tracking stocks in the PIIGS nations.

None of the single-country PIIGS ETFs are currency hedged funds, but that has not prevented investors from allocating over $300 million combined to the five PIIGS since the start of April. That includes $225.5 million as of April 27 to the iShares MSCI Spain Capped ETF (EWP) .

“ ETF investors were originally slow to get behind the periphery rally, but flows have started to gather pace over the last couple of months. The 42 ETFs that track periphery eurozone equities have seen €428m of inflows in April to date. This puts these funds on track for their best four weeks of inflows since last June,” according to a note from Markit posted by Chris Dieterich of Barron’s.

EWP has traded modestly higher this month as has the iShares MSCI Italy Capped ETF (NYSEArca: EWI ), which has attracted over $86.1 million on a month-to-date basis through April 27. EWI currently trades around $15.40, but earlier this month, Strategic International Securities (SIS), a New York-based registered investment advisor, placed an $18 price target on the lone Italy ETF. [Upside Seen for Italy ETF]

“If the euro continues to weaken the EWI will underperform the FTSE MIB up 21.8% in Q1 2015 because of the strong dollar. This is in contrast to the 8.8% increase in EWI for Q1 2015, which highlights the importance of hedging the currency with these ETFs,” according to SIS.

Despite renewed concerns that Greece is on course to depart the Eurozone, investors have allocated $15 million to the Global X FTSE Greece 20 ETF (GREK) this month. Like EWI and EWP, GREK has traded only slightly higher since the start of April, but since April 21, the lone Greece ETF has surged 16.3%. Still, Greece remains on the cusp of a sovereign debt default.

“Comparisons to Lehman Brothers are inevitable, but there are major differences. First, the world remembers 2008 and Lehman Brothers and people have been warned. In contrast, when Lehman was close to the end, most people expected the Fed and the US Treasury to stage a last minute rescue as they did six months before with Bear Stearns. No one expects an instant fix for Greece. Some have taken precautions – money has been flowing out of Greece to the rest of Europe for several months. Second, attention will shift to European countries which some investors worry about: Spain, Portugal, Ireland or Italy. The good news is that these are in better shape than a few years ago and in much better shape than Greece,” said David Blitzer, chairman of the index committee, S&P Dow Jones Indices, in a note out earlier this week. http://www.etftrends.com/2015/04/indexology-greece/

Investors have added a combined $5.5 million to the Global X FTSE Portugal 20 ETF (PGAL) and the iShares MSCI Ireland Capped ETF (EIRL) this month.

iShares MSCI Italy Capped ETF


ETF Trends editorial team contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.