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The MSCI France iShares ETF (EWQ) has underperformed recently. This is probably due to the underweighting in this index of French banks, which have done well recently on expanding into Russia.

I recently liquidated my shares in this ETF. It has NAV of $30.72, total net assets of $208,903 and 6,800,000 shares outstanding. It has 13.95% in banks and 13.82% in energy. The rest of its portfolio is divided up equally in capital goods, pharmaceutical goods, and to a smaller extent in utilities and insurance.

Compared to the Morningstar Large Value ETF (JKF), EWQ is underweighted in financial services. JKF is 37% weighted in financial services, 22% in energy, and equally in health care, consumer goods, telecommunications and utilities, with an NAV of $77.87, 4,000,000 shares outstanding.

The following table provides daily returns and annualized standard deviations since the beginning of May:

French banks roaring into Russia

One of the premier French banks, BNP Paribas, has recently opened a trade center in the Ukraine. The French banks have fostered a natural relationship with Russia. BNP-Paribas, in particular has posted a return of 40% over the same period, and comprises 44% of the CAC Banks French sectoral index.

The index itself posted a 30% return over the same period, with an average of 5.35% average Euro appreciation over the period:

BNP itself registered a 30.6% increase in its EPS y/o/y this quarter while Societe Generale, which comprises 33% of the CAC banks index, posted a 24% return over the period. Probably the under performance of EWQ is due to its underweighting of these overperforming French stocks.

Source: iShares France ETF Underperforming Due to Low Bank Component