EDEN iShares MSCI Denmark ETF

The Euro zone finally emerged from the 18-month long recession last year, but other economic problems still loom large over the region. The economy is now running the risk of stagnation. (read: European ETFs in Focus on Standard and Poor's Downgrade)

It is expected that GDP growth  for this region dipped to ~0.4%-0.5% in 2013. Also, unemployment stands out like a sore thumb at a record high of 12.1%.

Moreover, there are risks that the Euro zone might suffer from deflation, a condition in which prices fall, thus arresting growth within the economy. The current inflation figure of 0.8% is well below European Central Bank’s target inflation level of a tad under 2%.

Even the record low interest rate of 0.25% seems to be insufficient to bolster demand.

Is There Any Gem In this Region?

While currently things are not so bright for the Euro zone and its economy is expected to grow at a moderate 1.1% in 2014, one country that stands out in this region is Denmark.

After four long years of stagnation, this country within the Euro zone also managed to come out of recession last year. (read: 3 Top Ranked Europe ETFs to Buy Now)

Though the country is currently going through record high levels of household debt, which is hampering consumption growth, the country’s financial regulator is believed to be working closely to regulate the credit policies of mortgage banks to prevent another housing bubble.

The country has a solid economic model which constantly strives to look for new ways to tackle problems. The country has stable employment levels thanks to its policy of encouraging employers to provide training to their employees.

Moreover, the country has lower budget deficits, less inequality and a high ratio of working class to total population. The country is witnessing improving fixed capital investment, and rising exports on the back of strengthening external demand. Further, the Nordic region enjoys ample foreign-exchange reserves.

Also, buoyed by lower interest rates, improving confidence and healthy employment growth, Denmark is expected to grow at the rate of 1.6% in 2014.

Based on these strong fundamentals, the Danish economy is expected to continue outpacing other Southern European nations.

Thus, a look at this top-ranked Danish ETF could be a good idea to capture the surge in the space, especially based on the Zacks ETF Ranking system.

About the Zacks ETF Rank

This technique provides a recommendation for the ETF in the context of our outlook on the underlying industry, sector, style box or asset class. Our proprietary methodology also takes into account the risk preferences of investors.

The aim of our model is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other ETFs with a similar level of risk.

Using this strategy, we have found one Danish ETF – the iShares MSCI Denmark Capped Investable Market Index Fund (EDEN) – which has a Zacks ETF Rank of 2 or ‘Buy’ rating (read: all the Top Ranked ETFs). EDEN is the only ETF available, offering investors an exposure to Denmark.

EDEN in Focus

Though rather unpopular with just $18.5 million in AUM, the fund has returned a stellar 39.53% in 2013, ranking among the top three best performing funds in the Europe equities ETF space. In fact, the fund is one of the best performing global ETFs of 2013.

The Danish ETF uses a passive strategy and seeks to match the price and yield performance of the MSCI Denmark IMI 25/50 Index, before fees and expenses. The index uses a capping methodology to limit the weight of any single component to a maximum of 25% of the index.

Holding 38 securities in its basket, the product does not offer wide diversification to its investors, as it allocates nearly 65% of the assets in the top 10 holdings.

However, the fund is comparatively less volatile because it primarily invests in large caps (63%), while 17% of the fund is allocated to mid caps. (see all European Equity ETFs here)

Novo Nordisk – the top spot in the basket – alone captures more than one fifth of total portfolio assets, while the next two spots – Danske Bank and AP Moeller-Maersk– make for a combined 14% share.

From a sector look, the fund is skewed towards the healthcare sector with a 38.54% share, followed by industrials (26%) and financials (15.80%).

The fund has returned around 10% in the past month.

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ISHARS-MS DNMRK (EDEN): ETF Research Reports
 
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