Roger Nusbaum
There are many single-country ETFs, and most of them get very little notice. One that flies under the radar is iShares MSCI Spain Index Fund (EWP Quote - Cramer on EWP - Stock Picks).
How under the radar is it? EWP has $159 million in assets, compared with a whopping $13.5 billion in the iShares Japan Index Fund(EWJ Quote - Cramer on EWJ - Stock Picks), the largest single-country exchange-traded fund. Spain may seem like an obscure investment option, but its recent economic gains and low interest rates have paved the way for potentially strong stock market growth in the country. I believe foreign exposure is becoming more important as an investment theme, and Spain merits consideration. Europe, generally speaking, has been outperforming the U.S. The U.S. is closer to the end of its economic cycle than Europe is, implying that if the European economic expansion still has a way to go, so might the stock market expansion. Moreover, Spain is growing faster than Europe. Spain's first-quarter gross domestic product grew 3.5%, compared with 2% for the eurozone (the subset of European states that has adopted the euro). In fact, Spain's GDP growth has outpaced the eurozone in every quarter since the first quarter of 2003. The trade-off for higher growth, as you might expect, is higher inflation. Spain's June consumer price index came in at 4%, compared with 2.5% for the eurozone. The CPI has been running hotter than the region since at least 2002 (as far back as the data on the Banco de España Web site). Despite higher GDP and CPI rates, yields on 10-year Spanish debt is consistent with the rest of the continent, at about 3.90%. The Spanish stock market stands to do well because relatively low interest rates could spur growth. Spain has interest rates that are lower than they would be otherwise, given its growth rate, because it is a member of the slower-growing eurozone, and its interest rates are set in tandem with the member nations. The iShares Spain, or EWP, represents one way to capture these gains. EWP has some track record for trading similarly to the iShares MSCI EAFE Index Fund (EFA Quote - Cramer on EFA - Stock Picks), which is often considered the standard for overseas investing. As the chart below shows, EWP has been pulling away this year, which I believe is because of Spain's faster growth rate. Investing in Spain makes sense if you believe that its faster GDP growth will continue to mean better stock market performance than the rest of Europe.| Mucho Dinero Spain's ETF outperforms the U.S. and international indices |
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| Source: Big Charts |
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