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Netherlands ETFs
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About Netherlands ETFs |
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Netherlands ETFs: Overview and forecast
The Netherlands, like many European markets, is just starting to pick up the ETF concept. It's a small market at this point, again pioneered by ishares, with the original local representative an ETF called iShares MSCI Netherlands Index Fund (AMEX:EWN) and an LSE ETF, Shares AEX ETF (LSE:IAEX).
This is another specialist national market, with some strong local stocks as the holdings and traditional index based ETF models. The Dutch market has followed the general pattern of the German market, and generated quite strong margins in the second quarter of 2009, on lower volumes.
EWN is a pretty good reference to the Dutch ETF market. A check of our Holdings link gives the relevant data and some figures about the fund's assets, net distribution, and trading averages. http://www.etftips.com/EWN#holdings
A quick look at these figures and the holdings will show a weighting pattern using two primary holdings, and relatively strong percentile holdings in other stocks. This formula is used to provide a returns base, and is quite common in stock equity ETFs where the emphasis is more on strength than formula weightings. This method works well in local market index asset mixes.
Short term (6 months)
The mix hasn't done EWN any harm, either in the first six months of 2009. The 50% rise off the March lows has restored a positive complexion to the Dutch ETFS. There's some reason to believe that there remains some more upside in the Dutch market, too.
This is an interesting study in price moves and relative volumes, for the enthusiasts. The Dutch ETFs are well below their pre 2008 crash historical prices, and even if the world has changed a lot since then, this market seems to have fallen longer and slower, and bounced faster and further, than the average ETF pattern. Trader participation has been pretty consistent, and the Dutch ETFs have been trading steadily, through 2009. It will be noted that volumes and price rises haven't been mirror images of each other, suggesting non- program selling, and that the lower turnover period in the second quarter of 2009 preceded further rises.
Medium term (2 years)
The Dutch ETFs, like the German ETFs, are unique, because of the local mix of strong companies. For those interested in spreads of European stocks, these are the obvious contenders for investment, and this is where the Dutch ETFs can be expected to do well in the future.
Holland, like Belgium, France and Germany, has a big capital investment economy, and the current state of both local investment markets and demographics is creating opportunities for the ETF market. In the medium term, the upside will be based on a global recovery, in Holland's case, but the signs are that a real upside, either in the development of existing ETFs or creation of new ones to cover the advanced Dutch financial market, will begin.
Long term (5 years)
The Dutch ETFs did extremely well during the boom period before the 2008 crash. They attracted capital, and have performed quite well, both as traders and as investments, prior to that denouement. There are some indications from EWN's trading volumes that the Dutch market response, both before and after the crash, was preemptive, with investors moving quite noticeably prior to the crash, and positioning during it.
The long term upside for the Dutch ETFs is likely to be based on a good investment market positioning strategy, and the post crash performance is consistent with investor buying, rather than trader buying and selling, patterns. If so, the Dutch ETFs have a good position in a revived global market.
Qualifiers to projections
The Dutch ETFs are in several ways different to other global ETFs. Ironically, the Dutch ETFs behave the way equity market ETFs are supposed to behave. The indications of investor buying patterns have some ramifications. Historically, the EWN story is a study in character. For most of its existence, this ETF has traded across a bandwidth of $10- $30. It tanked in 2003 at under $10, and progressed steadily upwards, started trading heavily in 2006 and was trading in higher volumes up until the crash, through the top of the boom and bust cycle.
This market normally doesn't produce massive price spikes and troughs, except in atypical conditions. The second quarter of 2009 shows a consistent level of investor interest, and it would be a case of d?j? vu for investors, because its performance in the first half of 2009 is almost exactly the same as its 2003 performance, except it's risen slightly faster and farther. The Dutch ETF market is normally very much an investor market, and should be assessed as such.
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Last Updated on: 2010-01-14 02:03:40 |
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