As investors have been eager to pull cash from U.S. equity exchange traded funds and as many emerging markets funds have been plagued with glum performances, Europe ETFs have been pleasantly defiant.
Defiant because Europe ETFs have bucked the outflows trend with some delivering positive returns. Even with sturdiness of some European equity markets and impressive performances by and inflows to ETFs tracking peripheral nations, some investors prefer the continent’s more conservative offerings. [Europe ETFs See Surge in Inflows]
That includes Germany, the Eurozone’s largest economy.
“Political stability and economic strength continue to favor German shares over those of France, which – in turn – should be outperforming Italy. Moreover, hesitancy in pursuit of much-needed macroeconomic reforms will likely undercut French shares as renewed political instability undermines Italy’s appeal to foreign investors,” said S&P Capital IQ in a new research note.
Germany, France and Italy are the European Monetary Union’s three largest economies, but Germany is “the most attractive market for investment, Germany’s long-established competitive advantages of resilient productivity, economic versatility, and political durability render German equities a core concentration in a globally diversified portfolio,” said S&P Capital IQ.
Of the major ETFs tracking each country, the iShares MSCI Italy Capped ETF (NYSEArca: EWI) has been the best performer year-to-date, but it has also been the most volatile. EWI is up 7.8% while the iShares MSCI France ETF (NYSEArca: EWQ) is up 2.3%. S&P Capital IQ has marketweight ratings on both funds. [Italy ETF Looks Tempting]
S&P Capital IQ Global Markets Intelligence says “mediocrity best describes how it expects France’s stock market to perform from now through 2015.”