With a year-to-date gain of nearly 28%, the iShares MSCI Spain Capped ETF (NYSEArca: EWP), the largest exchange traded fund tracking stocks in the Eurozone’s fourth-largest economy, is one of the best-performing single-country ETFs this year.
EWP’s bullish ways are no fluke as economic data point to an ongoing recovery in Spain and potentially signal more upside for the ETF and Spanish equities.
Ebbing political volatility in Spain and some major improvements to local economic data are helping drive stocks there higher. Additionally, the bank-heavy EWP could benefit as Spain’s banks are viewed more favorably by global investors.
“The consensus at the start of 2017 was for the economy to lose steam this year as tailwinds faded and past reforms wore off. Now its renewed momentum — which has allowed the government to raise its forecast twice already — has some economists predicting the best year since the recovery started in 2014,” reports Maria Tadeo for Bloomberg.
Related: Spain, Eurozone’s 4th Largest Economy, Hot for ETF Investing
EWP, which has nearly $1.5 billion in assets under management, tracks the MSCI Spain 25/50 and holds 26 stocks. Like many single-country ETFs, EWP is top heavy at the sector with financial services names accounting for 41.6% of the ETF’s weight. That is more than double the fund’s exposure to its second-largest sector weight, industrials.
Just two stocks – Banco Santander (NYSE: SAN) and Banco Bilbao Vizcaya (NASDAQ: BBVA) – combine for nearly 29% of the ETF’s roster.
“After growth of 3.2 percent last year, faster than its main euro-area peers, surveys and labor data point to continued strength in the economy. Banco Bilbao Vizcaya Argentaria SA and Bankia SA say it will top last year’s reading and grow 3.3 percent in 2017,” according to Bloomberg. “If they’re proved correct, that would be the fastest growth since 2007, before the housing market crashed and Spain tipped into recession. The economy probably grew 0.9 percent in the second quarter, the fastest in almost two years, according to a survey before data due on Friday.”
Investors are showing enthusiasm for EWP this year. The ETF has added $683.3 million in new assets year-to-date, a significant percentage of its $1.49 billion in assets under management.
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