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Will This Ireland ETF Bring Luck on St. Patrick's Day?

Every year on March 17, St Patrick's Day also known as the Feast of Saint Patrick is celebrated across the globe by millions of people with Irish lineage and even those without. Ireland’s favorite holiday is mostly associated with parades, wearing green and drinking,
 
Additionally, the country is gearing up to celebrate100 years as an independent nation in a few weeks’ time. The anniversary of the bloody 1916 Easter Rising, the event which marked the end of British rule in Ireland, will be commemorated with much fanfare. The time is ripe for taking a fresh look at the Irish economy, which is currently on a rebound.
 
Outlook for Ireland
 
Ireland’s increasing consumer confidence, falling unemployment, reviving domestic demand and rising exports, amid high public debt, have injected optimism into the economy. The International Monetary Fund is also of the view that the Irish economy is rebounding.
 
Currently, Ireland is the fastest growing economy in the EU. The Irish economy grew by 7.8% in 2015. Apart from the factors mentioned above, the growth trajectory is also fueled by an improving housing market and a recovering banking sector.
 
Though still high, the unemployment rate is exhibiting a downward trend. As per Trading Economics data, the unemployment rate has moderated to 8.8% in February 2016 from 10% in February 2015. Additionally, as the ratio of unemployed people decreased, the jobless rate fell to its lowest level since December 2008.
 
Furthermore, European Central Bank’s easing measure should help the country. Last week, the European Central Bank (ECB) came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy (read: Surprise ETF Winners & Losers Post ECB Easing).
 
Moreover, Ireland is rated investment grade by all the major credit rating agencies, thanks to its growth potential. These encouraging trends are sure to lend a zest to St. Patrick’s Day celebrations and the centennial of the Easter Rising ahead. In this context, the Ireland ETF – iShares MSCI Ireland Capped ETF (EIRL) – is expected to be in focus (see all European Equity ETFs here).
 
Ireland ETF in Focus
 
The fund tracks the MSCI All Ireland Capped Index and provides exposure to a small basket of 25 Irish stocks. The product is heavily concentrated in its top firm – CRH plc – that alone accounts for more than one-fifth share of the basket while the next three firms – Kerry Group, Paddy Power Betfair and Bank of Ireland – have exposure of 11.6%, 7.3% and 5.1%, respectively. Other firms hold less than 4.6% of assets.
 
From a sector look, consumer staples and materials take the top two spots at more than 25% each, followed by industrials (15.4%), financials (13.7%) and consumer discretionary (10.2%). The ETF accumulated about $164 million in its asset base and sees pretty low volume of around 60,000 shares a day. It charges 47 basis points as fees to investors and has a dividend yield of 1.80%.
 
The fund has returned 7.6% over the past one year but lost 6.7% in the year-to-date time fame. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: 5 Best Performing Country ETFs of 2015).
 
Bottom Line
 
Given the improving macro trends, investors could try their hands on this Ireland ETF. Who knows, it may have some hidden luck on St. Patrick’s Day, given its track record of pushing the stock markets higher.
 
However, a word of caution is called for given Ireland’s high public debt to GDP ratio, despite its growth outstripping other European nations. Additionally, the openness of the financial system and the economy makes the country vulnerable to external forces. 
 
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ISHARS-MS IRLND (EIRL): ETF Research Reports
 
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