A Europe ETF to be Cautious With

Over the past several years, plenty of single-country exchange traded funds tracking European economies have faced headwinds with the most notorious examples being those funds tracking PIIGS countries, most notably Greece, Italy, Portugal and Spain.

So it might be surprising to investors to learn that Finland and the iShares MSCI Finland Capped ETF (BATS: EFNL), which provides exposure to Finnish large-, mid- and small-cap stocks, is a Europe single-country ETF to tread carefully with. After all, through much of Europe’s volatility, Nordic countries have been seen as beacons of stability.

Add to that Finland is one of a small number of countries left in the world with an AAA sovereign credit rating. However, the economy there is rapidly declining. Finland has been a pillar in the Eurozone economic bloc, but the central has warned of an impending financial crisis that could rival Italy’s, pressuring the long-term outlook on the Finnish economy and related exchange traded fund.

“Its economy, which has contracted every year since 2012, was the worst performer in the common-currency area in the first three quarters of 2015, according to Eurostat data. Its deficit is relatively higher than Italy’s, despite being ranked fourth in the European Union in terms of how much taxes and social charges it demands from its citizens, and its unemployment rate exceeds those of its Nordic neighbors,” according to Bloomberg.

Recently revealed data show Finland’s unemployment rate at 9.2% and the country’s competitiveness is also in decline.