Talks Between Two European Utilities Might Affect Global ETF

European utilities may be on some investors minds, as the biggest power producer in Europe gets ready to offer a takeover, lighting up related exchange traded funds (ETFs). Electricite de France S.A., the biggest power producer in Europe, is offering British Energy Group Plc a contract that will be 5% below the company's share price, report Paul Dobson and Ambereen Choudhury for Bloomberg.

The proposal is expected any day now, but it's confidential. Many power producers want to buy British Energy because Prime Minister Gordon Brown backs nuclear reactors to meet energy demand and replace the aging units. The U.K. government would sell its stake in the deal.

iShares S&P Global Utilities (JXI) holds 1.9% in Electricite de France, Iberdrola is 5.9%, with E.ON AG at 10.9%, the largest holding. The fund is allocated throughout Europe, with the United Kingdom containing 10.7% and France at 10.8%.

European Large-Caps On Their Way Up To Help ETFs

Although the U.S.dollar is weak, and the credit crunch has tightened the cash flow, European large-caps don't seem to be feeling this.

Exchange traded funds (ETFs) that hold European large-cap stocks include Vanguard European Stock (VGK) and the iShares S&P Europe 350 (IEV), both of which are down year-to-date, but have been ticking back up during the past four weeks.

VGK in the last month has risen 2.1%, but is down 3.1% year-to-date. IEV is up 1.7% in the last month, but down 3.4% year-to-date.

VGK is made up of bigger firms, while IEV is actually five years older. IEV holds 600 companies while VGK holds 348. The ETFs track different indexes, the MSCI Europe Index for IEV and the S&P Europe 350 Index for VGK.

Both ETFs give exposure to large, Western European companies and currencies, reports Joanne Von Alroth for Investor's Business Daily. The large-caps that make up these funds have performed well recently.

But not all is rosy in Europe: the European Union is battling 3% inflation, a credit crisis and high food prices. Some retailers have seen sales fall. But there's optimism, too, since in April both France and the United Kingdom saw their highest monthly benchmark index gains in nearly five years.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
 

"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."

Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS): Represents Australia
• NETS DAX Index Fund (DAX): Tracks Germany's major exchange
• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC): Represents France
• NETS Hang Seng Index Fund (HKG): Represents Hong Kong
• NETS TOPIX Index Fund (TYI): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

Who's Big In The European ETF Circle?

The European exchange traded fund (ETF) market is just as hot as its U.S. counterpart. The European market is capitalizing on the rapid growth of the industry, as major providers have adopted some very different strategies in their efforts. Paul Amery for Index Universe gives a rundown of the top ten European providers.

BGI/iShares: 137 ETFs, $57.65 billion assets under management, 43.3 of the market share; the major area iShares is missing is in the leveraged/inverse ETF arena.

Lyxor: 87 ETFs, $31.48bn AUM, 23.6% market share; Possibly too equity dependent.

db xtrackers: 49 ETFs, $10.66bn AUM, 8% market share.

AXA/BNP: 30 ETFs, $6.69bn AUM, 5% market share.

Credit Suisse: 8 ETFs, $4.97 bn AUM, 3.7% market share.

Credit Agricole: 3 ETFs, $3.02bn AUM, 2.3% market share.

XACT Fonder: 9 ETFs, $2.51bn AUM, 1.9% market share.

ETF Securities: 55 ETFs, $5bn AUM, 1.8% market share.

State Street Global Advisors: 13 ETFs, $2.35bn AUM, 1.8% market share.

UBS: 9 ETFs, $2.14bn AUM, 1.7% market share.

Everyone, Welcome the New ETF Provider Northern Trust (Hi, Northern Trust)

The exchange traded fund (ETF) industry has a new provider. It's Chicago-based Northern Trust, and the launch of their funds have been anticipated since last winter.

Murray Coleman for Index Universe reports gives the lowdown on the first batch of funds, which will have an expense ratio of 0.47%:

• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market-cap on the London Stock Exchange.
• NETS S&P/ASX 200 Index Fund (AUS): It will compete against the iShares MSCI Australia (EWA), which is one of the oldest international ETFs around.

Four more ETFs will follow soon:

• NETS DAX Index Fund (DAX): Tracks the major exchange in Germany.
• NETS TOPIX Index Fund (TYI): Covers Japan
• NETS CAC-40 Index Fund (FRC): Tracks France's market
• NETS Hang Seng Index und (HKG): Follows stocks in Hong Kong

Missing from the list are Northern Trust's anticipated entries into the all-world ETF segment, which was recently joined by both Vanguard and iShares.

The timing of the France-focused single country ETF could bring good things, as France's economy has been holding up well against the international credit crisis. Helen Beresford for Thomson Financial News reports that on the flip side, the GDP growth forecast was cut by the government to between 1.7-2%. The iShares MSCI France (EWQ) is up 8.7% in the last month, although it's down 5.4% year-to-date.

The German economy has been growing, but it needs to make changes if that growth is going to continue. Paul Carrel for Reuters reports that the German economy needs reform to refresh the labor market and education systems, both vital parts of the country's economy.  The iShares MSCI Germany (EWG) is up 6.9% in the last month, but it's down 9% year-to-date.

The European ETF Market Compared To The U.S.

While most of our coverage centers on exchange traded funds (ETFs) listed in the United States, we realize that they aren't just a U.S. phenomenon. We might have the largest market for them, but Europe, Asia and Latin America all boast fast-growing ETF industries of their own.

At the end of 2007, the European ETF market had amassed assets of $128.4 billion in 423 funds, reports Paul Amery for Index Universe.

iShares is the leading ETF provider in both here and in Europe, while State Street Global Advisors is the second-largest provider in the United States. The lack of similarity of product providers within the two markets is interesting, but as time goes on there will be more overlaps.

As for asset class, fixed income has almost three times the amount in fixed income that Americans do, thanks to Europeans' historical preference for bonds. Both markets have a  strong domestic bias, but the European equity sector is less interested in overseas investing than the United States is.

More than half of the ETFs in the United States are held by retail investors; in Europe, it's closer to one-third, but data backing up this figure isn't easy to find.

Europe has special challenges, thanks to differences between the countries. Most of them might be using the same currency, but their cultures and legal systems are not the same. It's also typical to have ETFs cross-listed between exchanges, since each country generally has its own. Often, you'll see primary listings, then secondary ones.

In a country-by-country breakdown, Germany has the largest number of primary listings: 157. It's followed by France (119), United Kingdom (84), Switzerland (21) and Italy (6).

Vanguard Wants to Put Its Arms Around the World With New ETF

On the heels of iShares' new all-world exchange traded fund (ETF), Vanguard is trying to enter the fray with its own similar kind of fund.

They've registered with the Securities and Exchange Commission (SEC) for the Vanguard Global Stock Index Fund, which would offer three share classes: investor shares, institutional shares and ETF shares. It's anticipated to launch in the second quarter of 2008.

The fund aims to track the FTSE All-World Index, a market-cap weighted index of large- and mid-cap global stocks in 48 countries. About 55% of the index will be made up of stocks outside the United States.

Vanguard's new fund will join the iShares MSCI ACWI Index Fund (ACWI) as the first two true all-world ETFs. The country breakdown for the iShares fund has the as its top five countries the United States, 41.8%; the United Kingdom, 9.6%; Japan, 8.6%; France, 4.7%; Germany, 4.1%.

Across the sectors, it's most heavily weighted in financials at 22.5%. Energy is 11.7% and Industrials are 11.2%. Exxon Mobil (XOM) is the largest constituent, representing 1.6% of the holdings. General Electric (GE) is 1.2%.

It'll be interesting to compare the two funds side-by-side once Vanguard's is up and running.

U.S. Credit Crisis Delivers a Punch to Some Global ETFs

The problems aren't just here in the United States: the credit crisis is also hitting markets in other countries and taking some of their exchange traded funds (ETFs) down with it.

Investors are wary of the acquisition of Bear Stearns by JPMorgan, reports Toby Anderson for the Associated Press. One bank was saved, but what does it mean for the banks that are still standing? The challenge now for investors is knowing if the bottom has been reached, or if the markets will continue to fall even further.

While the Federal Reserve scrambles to prevent an all-out meltdown, global markets still reflected a nervous sentiment:

• iShares MSCI United Kingdom Index (EWU): down 3.7% intraday, down 11.2% year-to-date
• iShares MSCI France Index (EWQ): down 2% intraday, down 12% year-to-date
• iShares MSCI Australia (EWA): down 2.8% intraday, down 12.8% year-to-date

Asian stocks fell today, as well. Japan's benchmark index lost 3.7% to hit its lowest point in more than two and a half years. Interestingly, the iShares MSCI Japan Index (EWJ) was up 2.5% intraday. The fund is down 12.8% year-to-date. Hong Kong's Hang Seng index fell 5.2%, and the iShares MSCI Hong Kong (EWH) was down 1.9% intraday. Year-to-date it's down 22.3%.

It Could Be Time to Take a Global View with Healthcare ETFs

While the United States is still trying to sort out its own health care system, perhaps it's time to take a more global perspective with health exchange traded funds (ETFs).

Here, we're trying to figure out who will be insured and to what extent, and the FDA approval process can hinder the rate of new drug development by biotechnology companies.

With that, Gary Gordon for Seeking Alpha singles out the iShares S&P Global Healthcare Index Fund (IXJ) for several reasons:

• It's one-third less volatile than the S&P 500
• There's exposure to England, Switzerland and France (France has the world's third-largest health care budget; England provides free health care to all residents of the United Kingdom; health care is compulsory in Switzerland)
• Its five-year returns are within a few percentage points of the broader S&P 500, and with less risk

This fund sits far below its trend line (200-day moving average), so wait until it migrates back above before taking a look.

Europe Gives ETFs Air Kisses As They Gain In Popularity

The next big market for exchange traded funds (ETFs) is shaping up to be Europe.

In fact, reports Vito J. Racanelli of Barron's, Europe is showing the strongest growth in the popularity of ETFs. But while there's a lot of investor interest, it hasn't reached the U.S. level just yet.

According to Morgan Stanley, assets in European-listed ETFs jumped 40% -- from $90 billion to $126 billion -- in the first nine months of 2007. Worldwide, assets in ETFs jumped 32%. In the U.S., assets grew by 30%, and they are nearing the $600 billion mark. As of Sept. 30, of the European countries, Germany had the most ETFs at 154. France came in second, with 114.

The ETFs attracting the most interest in Europe are those linked to the Dow Jones Euro STOXX 50, a large-cap index. At the moment, ETFs in Europe are geared toward institutional investors. But as an increasing number of individual investors discover their benefits, their ranks and assets under management can only grow.

France ETF du Jour

French president Nicholas Sarkozy's pro-business policies are now in effect, so are they faring well for the French-focused exchange traded fund (ETF)? iShares MSCI France Index (EWQ) is up 15.9% year-to-date and holds quite a diverse set of stocks. Financials make up 18.7% of the ETF, followed by consumer discretionary at 14.5%, energy at 12.3% and industrials at 11.3%. Top holdings include energy company, Total SA (TOT) at 11.8% and drug maker Sanofi-Aventis (SNY) at 6.6%.

Dave Mock for The Motley Fool reports on France Telecom (FTE), which makes up 4.7% of EWQ, and its popularity with investors.  It is the largest provider of telecommunication services in the nation and has significant operations in European and emerging markets.  Their wireless division has the rights to sell Apple's iPhone and hopes to sell 100,000 by the end of the year.

French Unions Back Down to President: Vive l'ETF

This month the transportation and energy union workers went on strike in France, making many across the globe wonder about the future of the country and its related exchange traded fund (ETF). The strike was a test for the political future of President Nicolas Sarkozy and his ability to bring about economic reform, reports Investor's Business Daily.  It looks like Sarkozy won this round and he vows to move ahead with reforms.

The French economy is in economic trouble based on excessive government and union influence in the private sector.  France's population is also rapidly aging and workers are retiring at younger ages.  Since 2000, France's GDP has grown 1.7% a year after inflation; compared to 2.1% for the rest of the EU and 2.4% in the U.S.

With this political win for Sarkozy, his leadership should help bring about reform and help put France into a better economic situation.  As the country moves forward, the iShares MSCI France (EWQ), which is up 12.5% year-to-date, should benefit.

France and Its ETF Have Reason to Be Wary

Although France's exchange traded fund (ETF) the iShares MSCI France Index (EWQ) is up 14.1% year-to-date, its performance could change if the country doesn't cut its deficits. Euro group president Jean-Claude Juncker called on France to cut the level of its public spending, which is proportionally the highest in the European Union, reports Greg Keller for The Financial News Limited. Juncker said he also would like to see France achieve a balanced budget by 2010.

France's economy and ETF recently received a helping hand from its increase in exports for the month of August, as the pace of global economic growth helped overcome appreciating currencies and higher financing costs, reports Simone Meier and Christian Vits for Bloomberg. However, if the euro continues to rise and stay at its recent highs, the subsequent rising oil prices and higher credit costs could pull the country's growth down next year.

Will Sarkozy's Economic Plans Help Boost French ETF?

The iShares MSCI France Index (EWQ) exchange traded fund (ETF) continues to stabilize and rise above its long-term trend line after the recent financial-market turbulence. Currently, EWQ is up 7.0% year-to-date.

In response to the global credit crunch that affected most countries' economies and their ETFs, President Nicolas Sarkozy has instructed his finance minister, Christine Lagarde, to draft a plan that would require financial institutions to disclose much more information about the financial products they sell, according to David Crane for The Toronto Star. In addition, Sarkozy has goals to reform and boost the French economy and tackle unemployment. If he can accomplish the tasks, it is expected to increase public morale that would lead to a rise in consumer consumption, similar to what the U.S. experienced under Ronald Reagan. However, it is unclear how the economic reforms will be financed, according to Francesca Barbieri for Equilibri.

Part of EWQ's increase also could be related to predictions that Europe's economy might expand more quickly than originally forecast, according to Ben Sills for Bloomberg.

French ETF Is Not Fried

Many eyes have been on the Tour de France, but what about the French exchange traded fund (ETF) and the country's new government? In May, new president, Nicolas Sarkozy and his center-right party took office with the economy on the agenda. Some of the highlights include lowering the tax burden on businesses, ending the 35-hour work week and reducing the size of the government. Richard Widows for TheStreet.com reminds us that part of the French economy's allure for investors is that there is plenty of room for improvement and growth. Even mild success by the new government could result in change for the better.

The steady rise of the euro in relation to the U.S. dollar has helped many European investments. Returns on French stocks have been positive in recent years, and the French ETF iShares MSCI France (EWQ) is up 12% year-to-date. So while surveying the Tour de France cyclists on July 29, realize the French economy and ETF will continue on pedaling.

European ETFs Blow Past U.S. in Performance

Europe has been kicking our butts lately when it comes to exchange traded funds (ETFs) and their performances. But why? 

One reason could be the new wave of political reform across several European countries, including Germany, Sweden, Belgium and France. The newly-elected, center-right leaning leaders tend to drive bull markets, says Carl Delfeld of ETF XRAY. And although our market has hit new highs, so have the European markets.

In addition, Europe's overall economy has been stronger than ours. Since the end of 2006, Europe's GDP has outpaced America's. The euro is at new highs against the dollar (today it reached $1.38) and the yen. Unemployment is down to 7%, which is the lowest it has been since the euro was created in 1999, according to The Economist.

Every dog has its day; it's only a matter of time before the United States is in the lead again.

• iShares MSCI Germany Index (EWG) - up 29% year-to-date
• iShares MSCI Sweden Index (EWD) - up 21% year-to-date
• iSHares MSCI France Index (EWQ) - up 17% year-to-date
• iShares MSCI Belgium Index (EWK) - up 11% year-to-date

For full disclosure, some of Tom Lydon's clients own EWG.

Conservative's Win Boosts French ETF

French voters chose their leader, Nicolas Sarkozy, a dynamic conservative who promised a future of opportunity, and in that helped keep the French exchange traded fund (ETF) moving upward. iShares MSCI France (EWQ) is a large-cap value fund that has had 5 consecutive quarters of double digit growth. EWQ is up 12% for the year and with 21% of the holdings in financials, the push just got stronger, reports Joanne Von Alroth with Investor's Business Daily. The funds jump during the past month was due to the run-off election between Sarkozy and Segolene Royal, with trading volume picking up the pace May 1st.

Under Sarkozy, France could say goodbye to high taxes, mandated workweeks, restricting regulations, and slow growth. A pro-American foreign policy, a cut in inheritance and income taxes, U.S.-style mortgage deductions, and lower unemployment - all changes that could contribute to the economy.

French Elections and the French ETF's Future

  The political impact on the French exchange traded fund (ETF) could be affected by today's presidential election. The two favored candidates are Nicolas Sarkozy, main center-right, and Segolene Royal, the Socialist. Both candidates take approaches that are on different sides of the market spectrum, says Carl Delfeld of ETFXRAY.com. The victory of Mr.Sarkozy could begin a market rally whereas Ms.Royal may lead to market uncertainty. iShares MSCI France (EWQ) is up 8.5% this year, despite France's slow growth, high tax and high unemployment rate. Ten of the 50 largest companies in Europe are headquartered in France, but they rely on the global economy, not France, for profits.