By Richard Bloch
After reviewing how some of the US-based indices appear to be bumping up against their 2007 highs, I also took a look at some widely held European funds.
Europe, as has become obvious this year, remains in the midst of a combined currency/economic/political crisis that could take years to resolve. Some even speculate these developments could threaten the euro as a viable currency.
I’m not sure how that will play out, but here’s a look at a few long-term charts for some of the country-specific ETFs for European countries, starting with Germany (EWG) and France (EWQ), two of the largest economies on the continent.
click to enlarge
Note: All charts reflect adjusted prices that account for splits and dividends.
Keep in mind that these country-specific ETFs are weighted by market capitalization. That means these funds can be concentrated in a handful of companies.
For example, Total SA (TOT) and Sanofi-Aventis (SNY) alone account for 17% of the iShares France ETF (EWQ). For the iShares Germany ETF (EWG), Siemens (SI), BASF, and Bayer represent more than 25% of that fund.
Moving to southern Europe, ETFs that track Spain and Italy (two of the so-called “ PIIGS” countries) trade well short of their 2007 highs.
The Italian market, as represented by the iShares Italy ETF (EWI) is the one furthest from its 2007 adjusted highs of all the funds I reviewed. But the iShares Belgium ETF (EWK) is a close second, as you can see in these charts for some of the smaller (northern) European economies.
It’s interesting to note that the Belgium ETF is weighted nearly 26% in financial stocks. As a comparison, the iShares Netherlands ETF (EWN) has less than a 20% weighting in financials. But it’s also possible that the Belgium ETF is impacted by its 24% weighting in just one stock – Anheuser Busch InBev (BUD).
Outside the Eurozone: Two bright spots
Finally, here are charts showing the iShares Sweden (EWD) and iShares Switzerland (EWL) ETFs. These are two European countries that chose to keep their own currencies instead of converting to the euro.
While these ETFs trade in US markets in US dollars, they can still be impacted by currency fluctuations of course.
The Swedish krona has basically held steady against the US dollar in the past four years, while the Swiss franc has gained. Back in early 2007, it took about 1.2 Swiss francs to buy a US dollar compared to only 0.98 Swiss francs today.
Currency strength could explain why the Swedish and Swiss markets appear as if they’re two of the continent’s brighter spots. They’re a lot closer to their 2007 highs – and they’re outside the Eurozone.