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Summary EWI provides access to Europe with less exposure to Greece-induced volatility, and is one of the few pure plays on Italy. OECD has raised its forecast for Italy and for Euro area as a whole for 2015 and 2015. The concentrated portfolio is anchored by a stable utility and financials at or near new highs. The recent pull-back in European markets due to Greek debt headlines presents an attractive entry point into the renaissance in the Euro area. Introduction The European Central Bank stepped up with bolder-than-expected monetary easing recently, which had the additional benefit of weakening the Euro currency. These twin factors led the OECD to raise their GDP forecast for Europe for 2015 and 2016. Ahead of this OECD revisions, these twin factors also led to a strong rally in European markets in the first quarter of 2014. Then the Greek debt drama heated up, and European indexes cooled down, to the tune of about 10 percent, which could present a good buying opportunity. Hence, we analyze single-country ETF performance to see how market factors have affected single-factor ETF rankings. OECD Ups Italy Forecasts The OECD has upped its forecast for Italy to +0.6 percent for 2015 and +1.5% in 2016 supported by rising exports and increased infrastructure spending. Though the Dax index dropped more than 10% since its early April high, EWI has climbed approximately 3 percent over the same time period (see Figure 1). (click to enlarge) Figure 1: The iShares MSCI Italy Capped ETF ( EWI) has moved up since mid-April even as major European indexes such as the DAX have consolidated in response to Greek debt fears (chart courtesy ETFmeter.com via StockCharts.com). The EWI Portfolio is Concentrated The EWI portfolio has just 26 stocks, but almost 23% is in two major holdings: ENI (NYSE: E ) (~11.9%) and Intesa Sanpaolo ( OTCPK:ISNPY ) (~11.3%). ENI is a utility that anchors the portfolio with relatively stable prices and about 6.6% dividend. Intesa Sanpaolo is near new five-year highs. Nearly two thirds of the portfolio is devoted to financials, consumer discretionary, telecoms and industrials, likely to benefit from the improving economy. The relative strength shown by the Italian markets has moved it to the of the more widely traded country ETFs (see Figure 2). As EWI digs into overhead resistance, its long-term technical picture is positive, has the strongest medium-term trend strength, and is experiencing more short-term buying pressure than most of the other ETFs in the table. Therefore, combining the technical picture on three time frames, EWI paints a positive picture. (click to enlarge) Figure 2: We rank the widely traded country ETFs on short-term, medium-term and long-term basis (data courtesy ETFmeter.com). Portfolio Positioning Investors looking to benefit from the renaissance in Europe should analyze EWI because of a gradual recovery in Italy and faster growth in the Euro area. The European Central Bank will determine the eventual success of this suggestion since the depth and duration of its quantitative easing policies will affect the economic performance supporting EWI. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The primary focus on the article is on the EWI ETF though others are mentioned in a table. Scalper1 News
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