When the markets were down last week, Spain’s exchange traded fund (ETF) iShares MSCI Spain Index (EWP) was the only country specific ETF with positive returns. Currently, EWP is up 19.4% year-to-date.

According to Prime Minister Jose Luis Zapatero, the solvency of Spain’s financial institutions and the strength of its economy are defending the country from the recent market turbulence that has been seen in other European Union (EU) member states. Spain’s equities markets have been hitting record highs over the last few days, reports Jonathan Gleave for Thomson Financial News. The prime minister said that EU leaders all agreed on the need to deepen the strength of financial markets and to defend them from further turbulence.

However, the real-estate slowdown that hit the U.S. seems to be spreading to Spain. Reasons behind the lag include higher interest rates, faltering confidence and tighter lending standards similar to what is occurring in the U.S, reports Joellen Perry and Keith Johnson for The Wall Street Journal. Some have said their higher payments on mortgages are cutting into their ability to spend. In addition, a recent report from the Standard & Poor’s says that Spain is set for a slump in its property market. Spain’s 10-year construction boom seems to have ended as housing sales were 11% lower in the second quarter this year than in the first three months. If the housing sector in Spain continues to slow, how will this affect the ETF?

Tags: EWP, Sector ETFs, Spain