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The MSCI France iShares ETF (NYSEARCA: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 (NYSEARCA: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