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France ETFs
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About France ETFs |
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France ETFs: Overview and forecast
France's ETF market is well represented by a stock equity fund, iShares MSCI France Index Fund (AMEX:EWQ), which is a an stock market based ETF. This is a consistent medium range volume trader, with a strong performance in the second quarter of 2009 which has boosted its price by 23% in that period.
Historically, EWQ's price has gone from $40 down to $14, and back up to around $22 since the first stages of the crash began with the American housing slump in 2007. The price range has been interesting, because this ETF didn't really stop falling, during and after the 2008 crash, until March 2009.
So this sudden and uncharacteristic sustained return to value is a good sign for EWQ. Its recent record shows that it's been having trouble maintaining consistent upward moves for more than a couple of weeks, so three months of upside is some indication of improvement.
Short term (6 months)
It's undeniable that EWQ has a historical value well above its current prices, but the post crash market effectively removes the validity of that perspective. Some ETFs have done a lot better as traders in the lower price ranges, and the estimate of upside has to be made from the 2009 bandwidth.
It is quite possible that the EWQ was eventually undervalued by the long drop from its highs. The price moves in the second quarter of 2009 can be said to have resulted from a justifiable upward correction. There's not much wrong with EWQ's holdings, which seem to be geared to take advantage of upward moves in its major stocks.
That said, the actual upside available isn't immediately clear. There is, definitely, an argument in favor of limited upward moves in the short term, but not dramatically so
Medium term (2 years)
There's one known factor in index based models of investment, and that's that the indices are likely to react predictably over the longer periods. EWQ is based on the MSCI France Index, which has been down for some time, and is set to rise over the medium term. Because the French market is a large, highly capitalized market, that means that it will also react strongly over this period, and generate definite upside.
Exactly when the French market will revive, however, is an issue investors can't ignore. There is also the possibility of a period in the doldrums, where not much happens over at least part of the medium term, before the global recovery generates enough thrust to restart the French economy. That will directly impact the performance of the French index.
Long term (5 years)
Like all advanced economies, the crash pulled the momentum out of the French market, and took a lot of capital with it. The markets want to start up again, but can't, until the liquidity and credit situations build up enough energy to recharge them. The French ETFs are likely to do a lot better in the longer term, as world trade returns to normal, and the French capital markets get up more steam.
The French ETFs are well placed to take advantage of the return to form of one of the world's largest economies. France, like most of Europe, is an emerging market for ETFs, and the current backward state of having a few basic models will also change for the better.
Qualifiers to projections
The ?Europe? factor is important in France, despite the traditional parochialism of the country and its mindset towards Europe. The French capital market isn't based on sentiment any more than the US. Practical considerations drive investment models, and in European investment, it's a matter of methods. That appears to be what's holding back the ETF model in France. Two of the three ETFs are actually German.
It's quite possible that a more active management style of ETF would be more appropriate in France, in which case the French ETFs would have a much broader base, and far more upside than the present situation suggests.
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Last Updated on: 2010-01-14 02:03:40 |
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