Alright, so perhaps “dash to trash” is a strong phrase and perhaps it is too early in 2014 to be rushing to judgment about Europe exchange traded funds, but an interesting (and obvious) trend has emerged.
Since the start of the new year, conservatively positioned diversified Europe ETFs such as the Vanguard FTSE Europe ETF (NYSEArca: VGK), one of last year’s best stories among Europe ETFs, have traded lower. VGK is down 1.3%, but is not alone on the downside. Single-country ETFs tracking supposedly steadier markets Germany, Switzerland and the U.K. have all lost ground since the end of last year. [Risks Linger for Europe ETFs]
Conversely, all five of the country-specific funds tracking the PIIGS nations have traded higher. The group is led by the Global X FTSE Greece 20 ETF (NYSEArca: GREK), which has been boosted by the best start to a new year by Greek stocks since 1994, and the newest member of the PIIGS single-country ETF lineup, the Global X FTSE Portugal 20 ETF (NYSEArca: PGAL). [PIIGS Strength Puts Spotlight on Spain ETF]
After gaining 1.1% on triple the average daily volume on Thursday, PGAL joined GREK as the leaders of the PIIGS group with 6.4% gains to start the year.
PGAL, which is just two months old, got a lift Thursday after the government there was able to successfully auction $4.4 billion in bonds in its first debt sale in several years. “Portugal’s return to the market coincided with similar success for Spain’s first big debt auction of 2014 and came two days after a popular bond sale by Ireland,” according to the Agence France Presse.
The bond sale is an encouraging for Portugal and PGAL because it shows the country can raise money on its own less than three years after needing a $106 billion bailout, the AFP reported. The 10-year bonds auctioned by Portugal were sold at yield of 4.89%, well above the yields on comparable Italian or Spanish debt, but well below the 7.7% yield on equivalent Greek bonds.
Like Greece, Portugal was one of the cheapest equity markets in the world on CAPE basis at the start of last year. And like Greek stocks, Portuguese equities ranked among the world’s best performers in 2013. [Inexpensive Global Markets Delivering for Investors]
PGAL’s 20-stock lineup does not look particularly cheap right now with a P/E of almost 27 and a price-to-book ratio of 1.33, according to Global X data.
That does not mean investors will not be willing to pay up for stocks that are still not close to pre-crisis highs in a country that home to high but falling unemployment and where economic growth is expected to check in at 2% this year.
Global X FTSE Portugal 20 ETF
ETF Trends editorial team contributed to this post.