By Jason Raznick
Well, it finally happened. Another ratings agency got around to cutting its rating on Hungary's sovereign debt. While not a PIIGS member, or even a member of the Eurozone for that matter, Hungary has been a European problem child for most of 2010.
That view has culminated with not one, but two ratings downgrades for the country this month. On Thursday, Fitch Ratings cut Hungary's long-term foreign currency issuer rating by one notch to BBB- and kept a negative outlook, according to The Wall Street Journal.
That's just one notch removed from junk status and follows Moody's Investors Service's paring of Hungary's rating by two levels to Baa3 earlier this month on concerns regarding long-term fiscal viability.
Further downgrades would be really bad news for Hungary because the country took $24 billion in loans from the European Union and the International Monetary Fund in 2008 and the country is expected to start repaying that tab next year.
Here are the ETFs to avoid or embrace if you're a short-seller on the Hungary news. Remember, there is no Hungary-specific ETF.
- The SPDR S&P Emerging Europe ETF (GUR) will be in play as Hungary is the epitome of "Emerging Europe."
- The thinly traded Emerging Global Shares Emerging Markets Energy Titans ETF (EEO) devotes 4.37% of its weight to Hungary, making it a possible short candidate.
- Another light volume name from Emerging Global Shares, the Emerging Markets Financials Titans ETF (EFN) devotes 3% of its weight to Hungary.
- The iShares MSCI Emerging Markets Eastern Europe ETF (ESR) also offers slight Hungary exposure and could be another short candidate.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
