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Not a Dutch Treat: Netherlands ETF Struggles


In a year that has generally been kind to exchange traded funds tracking supposedly steady developed Europe equity markets, the iShares MSCI Netherlands ETF (EWN) stands out and not for the right reasons.

The $228.6 million EWN, the lone Netherlands ETF, is saddled with a modest year-to-date loss. Slack economic data is hampering the Dutch economy, which was once seen as resilient during the darkest days of the European sovereign debt crisis.

The Dutch economy contracted 1.4% in the first quarter. In a reversal of the harsh weather excuse used by so many U.S. companies to explain disappointing first-quarter results, the culprit behind the Dutch economy’s poor start to the year is believed to be a mild winter in some parts of Europe that kept a lid on natural gas exports from the Netherlands, according to NL Times.

Job growth in the Netherlands also faltered in the first quarter with job losses of 32,000, NL Times reported. EWN’s struggles come as other ETFs devoted to Central and Northern European countries are in the green.

The iShares MSCI Germany ETF (EWG) is not “soaring” per se, but the biggest Germany ETF is still up almost 2% this year. The iShares MSCI Sweden ETF (EWD) is higher by nearly 7% year-to-date. [Go Dutch With This ETF]

Perhaps a more searing indictment of EWN’s 2014 laggard status comes by way of the iShares MSCI Switzerland Capped ETF (EWL) and the iShares MSCI Belgium Capped ETF (EWK).

The comparison of EWN to the Switzerland and Belgium ETFs is relevant because like those ETFs, EWN features a large weight to the consumer staples sector, which has been a solid performer as of late. [Super Staples ETFs]

And like EWL and EWK, EWN features an out-sized weight to just one staples stock. In the case of EWN, it is an 18.3% weight to Unilever (UN). But as Nestle (NSRGY), among others, helped EWL to an all-time last Friday and Anheuser-Busch InBev (BUD) has EWK higher by 8.1% this year, Unilever’s 10% year-to-date gain has not boosted EWN. [Belgium ETF Shines]

EWN’s trailing of comparable single-country Europe ETFs could be a sign that slack data are taking a toll on the country’s industrial sector (16.7% of EWN’s weight) or investors are concerned about the strength of Dutch banks (21.2% of EWN’s weight).

On the latter point, Fitch Ratings recently said it sees the largest Dutch banks as well-capitalized.

“We believe the banks will maintain solid capitalisation, especially as challenges in the domestic market appear to be easing. We revised 2014 GDP growth to 0.7% from 0% in March. ING’s 1Q14 results published today show early signs of loan impairment charges receding and we expect similar trends at other Dutch banks, although these are likely to stay high in the medium term,” said the ratings agency.

iShares MSCI Netherlands ETF