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PIIGS ETFs See Surge in Interest: Will It Last? - ETF News And Commentary

Sweta Killa

Europe has been dominating the headlines for most of this year, as investors have turned extremely bullish on the continent following its ultra-cheap policies. While Germany has been the top investment spot this year, the focus has suddenly shifted to PIIGS (Portugal, Ireland, Italy, Greece and Spain) countries in recent months (see: all the European ETFs here).

This is especially true, as the five PIIGS ETFs have seen robust capital inflows, gathering a combined $357.7 million since the start of April. This was primarily driven by the optimism to invest outside the U.S. due to global monetary easing and soft U.S. economic data.

In particular, iShares MSCI Spain Capped ETF (EWP) has been leading the way in garnering investors’ interest and pulled in $230.9 million in capital, followed by inflows of $86.1 million for iShares MSCI Italy Capped ETF (EWI) and $33.2 million for Global X FTSE Greece 20 ETF (GREK), as per etf.com. Two other funds – Global X FTSE Portugal 20 ETF (PGAL) and iShares MSCI Ireland Capped ETF (EIRL) – collectively accumulated about $7.5 million (read: ETF Asset Gainers & Losers of April).

Latest economic reports pointing to faster-than-expected recovery in the Euro zone especially Spain and Italy, boosted investors’ interest. Markit’s Composite Purchasing Managers Index for April has fallen in both Germany and France while it rose at the fastest clip since August 2008 in Spain and Italy.

However, the re-emergence of Greece default concerns are weighing on investors’ sentiment but it seems to be short-lived, as the country recently made debt repayment of €200 million (£149 million) to International Monetary Fund (IMF). Though a further €750 million repayment is most likely on May 12, Athens is expected to repay the loan on time but could run out of money to pay state pensions and civil servant wages at the end of the month (read: GREK ETF in Focus on Bailout Extension).

Further, the long-running deal talks between Greece and its creditors are progressing well and are likely to breakthrough by this month allowing the Greek authorities to unlock €7.2 billion in funds from its bailout program. If the deal comes through and Greece avoids defaults, money will continue to flow into the PIIGS ETFs.

All the five ETFs are easily crushing the broad European funds such as VGK and EZU by wide margins over the past 10 days. GREK surged 20.8% while PGAL added 3.4%. Other three funds are up over 1%. All these funds have a Zacks ETF Rank of 3 or ‘Hold’ rating.

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ISHARS-SPAIN (EWP): ETF Research Reports
 
ISHARS-ITALY (EWI): ETF Research Reports
 
ISHARS-MS IRLND (EIRL): ETF Research Reports
 
GLBL-XF PORTG20 (PGAL): ETF Research Reports
 
GLBL-X/F GREC20 (GREK): ETF Research Reports
 
VANGD-FTSE EUR (VGK): ETF Research Reports
 
ISHARS-EMU IDX (EZU): ETF Research Reports
 
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