A Flight to Europe ETF Safety Lands in Scandinavia

The Global X FTSE Nordic Region ETF (NYSEArca: GXF) is down less than 2% year-to-date, confirming the fund’s status as one of the more stable bets among Europe exchange traded funds. Stability from Nordic stocks and ETFs is nothing new. At the height of the European sovereign debt crisis, Nordic countries excluding Iceland, offered investors looking to maintain Europe exposure shelter from the storm.

The iShares MSCI Sweden ETF (NYSEArca: EWD) has tumbled nearly 5% this year, but the iShares MSCI Denmark Capped ETF (BATS: EDEN) has benefited from its large health care exposure this year on its way to a gain of more than 17%. That despite some macro headwinds for the lone Denmark ETF.

Western sanctions against Russia have proven problematic for EDEN. Danish farmers are major exporters to Russia and Danish banks have significant exposure to those farmers. Falling commodities prices coupled with the Russian sanctions are leading to an increased amount of sour agriculture loans in Denmark, relevant to EDEN because the ETF has a large weight to the financial services sector.

“One argument in favor of including Nordic funds in a portfolio: The region’s biggest economies—Sweden, Denmark and Norway—all have their own currencies, even though Sweden and Denmark are members of the European Union. That sets them apart from countries in the eurozone because the Nordic economies don’t depend on the European Central Bank to help stimulate their economies, says Todd Rosenbluth, a senior director at S&P Capital IQ,” reports Tanzeel Akhtar for the Wall Street Journal.

Some of Sweden’s larger companies are struggling due to weak demand from Europe, the country’s largest export market, as the krona currency appreciated against the euro. However, lower central bank rates has helped stimulate household spending.