ETF Update: Belgium, Broadband, and the Dark Knight
Belgium's ETFs May Fluctuate During Identity Crisis
As Belgium struggles with an identity crisis among its French and Dutch-speaking citizens, certain exchange traded funds may feel the repercussions of this turmoil.
Belgium is a country made up of two rather distinct regions: Dutch-speaking Flanders in the North and French-speaking Wallonia in the South. However, the capital city of Brussels is essentially an island of French-speaking Belgians in a sea of Dutch-speakers.
Despite the stalemate that exists between French and Dutch-speaking Belgians, a break up of this nation is seen as being unlikely, as reported by John Miller for the Wall Street Journal. Although this issue can be seen as some sort of a social dilemma, many of Belgium’s problems stem from the economy. Belgium has a Flemish majority of roughly six million and they have seen between $3 billion and $6 billion of tax money per year transferred south to Wallonia.
Flemish political parties also want each region to run its own health care, unemployment insurance, courts and other functions if the country was to split. However, analysts say a decision to split up is unlikely being that repercussions could include economic depression, or assassination. Along with potential economic depression comes the dispute over the capital city and who would take on the $400 billion national debt, which is guaranteed to surface if the country does indeed decide to divide.
Even with the recent acquisition of Anheuser Busch (BUD) by Belgium-based InBev (INBVF.PK), questions have appeared despite what was thought to be a more than fair buyout. Mexico’s Modelo is still analyzing the deal being that Anheuser-Busch had a non-controlling 50% stake in Modelo, reports Anthony Harrup for Dow Jones. Although Modelo executives have an overall positive outlook on their future, they do have final say in who will be its minor partner. If the AB-Modelo partnership no longer exists, perhaps the political state in Belgium may have had an influence in the decision.
Some Belgium ETFs include:
- iShares MSCI Belgium Index (EWK): down 22.8% for the past month; InBev is 7.8%
- NETS BEL 20 Index (BRU), launched on June 9; InBev is 6.7%
Broadband ETF Transmits Positive Numbers
The broadband exchange traded fund has been quietly putting up some pretty decent numbers lately.
The Broadband HOLDRs (BDH) are up 2.4% year-to-date, and 12.8% in the last two weeks. The strength of top holding Qualcomm (QCOM), 52.3% of the fund, could have something to do with it.
Last week, the communications technology company reported third-quarter revenues of $2.8 billion for an increase of 19% from one year ago, reports Godwin Gwetu for 123jump.
There is also news that Qualcomm has been working with Google for an Android phone system, in the hopes that the technology will create a worthy competitor to Apple’s iPhone, reports Jonathan Sidener for the San Diego Union-Tribune.
Another top holding, Motorola (MOT), 11.3% of BDH, reported a return to profitability for the second quarter. The news was a surprise to Wall Street analysts, reports Miriam Marcus for Market Scan. One analyst, though, foresees continued problems with the company based on the information that the company’s handset sales are running at a slower rate than other vendors’.
Why The Dark Night Can't Help Media ETF
You’d think that some record-setting numbers for one of the summer’s hottest and most entertaining movies would be delivering some hope to exchange traded funds (ETFs).
This weekend,The Dark Knight raked in another $10.5 million to its total gross of $324.3 million, making it Warner Bros.’ biggest hit in history. Unfortunately, though, the numbers seemed to have virtually no effect on the stock of the studio’s parent, Time Warner (TWX).
The Hollywood Reporter said the shares were at $14.70 on July 18, opening day. As of Tuesday, they were trading at $14.57, reports iMDb.
Interestingly, Time Warner is also the parent of DC Comics, Batman’s birthplace.
The media ETF, Powershares Dynamic Media (PBS), gives 5% to Time Warner. The fund is down 19.1% year-to-date.
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This article has 1 comment:
- sundrenched
- 13 Comments
Aug 02 08:38 AMThat said, at a PE ratio of 8 for the BEL-20, it seems cheap, and I'll put some money in when I think markets are ready to bottom. The risk that I see would not be that the country broke up (that would be positive risk beyond a transition period), but of continued gridlock at national government level. Even that is not a major concern, as most of the important powers have already been devolved to the different regions (mainly Flanders and Wallonia). No, we'll be go on like an old couple that hates each other's guts but that stays together. As the article mentions, the main stumbling block is what to do about Brussels, otherwise we'd have split already.
I've been thinking about backtesting a strategy involving country-ETFs that are at a cyclical low. Ireland, Belgium, Netherlands, Singapore, Cyprus... all have tantalizingly low average PEs at the moment, lower than my intuition tells me they should be as compared to the US (around 15). The idea is that everything returns to the mean eventually.