ETF XRAY

Belgium a Bank Heavy ETF

By Carl Delfeld of the Chartwell ETF Advisor

Those investors looking to gain global banking and financial exposure at low valuations should look at the Belgium ETF (EWK).

Belgium, which broke away from the Netherlands in 1830, sometimes presents investors with solid value. King Albert II reigns over this industrious nation with Dutch –speaking Flemings in the north and French-speaking Walloons in the south. Belgium sits at the crossroads of Europe and is home to both NATO and the European Union.

The Belgium ETF (EWK) contains 23 companies with the insurance and banking behemoth Fortis leading the way with 23% of the basket. Financials and banks make up more than 50% the holdings of the Belgium ETF with materials, food and telecom companies adding an additional 22%.

The Chartwell ETF Advisor has noticed that the Belgium stock market is undervalued trading at 1.6 times book with a forward price earnings ratio of 10.5. It enjoys low interest rates and according to data from EmergingPortfolio.com, global money managers were increaseing their Belgium weightings.

High Valuation Spurs Belgium ETF Sell Off

Belgium, which broke away from the Netherlands in 1830, sometimes presents investors with solid value. King Albert II reigns over this industrious nation with Dutch –speaking Flemings in the north and French-speaking Walloons in the south. Belgium sits at the crossroads of Europe and is home to both NATO and the European Union.

The Belgium ETF (EWK) contains 23 companies with the insurance and banking behemoth Fortis leading the way with 23% of the basket. Financials and banks make up more than 50% the holdings of the Belgium ETF with materials, food and telecom companies adding an additional 22%.

The Chartwell ETF Advisor noticed early this year that the Belgium stock market is undervalued trading at 1.9 times book with a forward price earnings ratio of 12. It enjoys low interest rates and according to data from EmergingPortfolio.com, global money managers were increasing their Belgium weightings.

Based on this, Chartwell added EWK to a couple of our portfolios and enjoyed nice returns. Last month, noting the rather high valuation of the overall Belgium market which is trading at 45 times earnings, we sold our EWK allocations. Our mommentum led, valuation check ETF selection process worked nicely.

Tom Lydon of ETF Trends pointed out yesterday that EWK is down 5% during the past week in spite of the recent elections which put the centre-right Flemish Christian Democrats in charge of leading the next government after eight years of dominance by the Liberal Party. Near term, the election may cause a bit of turmoil since Flanders with 60% of the population wants more autonomy and clout. Once valuations come down and expected economic reforms are initiated, it may be time to take another look at this small country that packs a punch way above its weight in global finance.

Momentum, valuations and politics are all part of the Chartwell ETF and Belgium mix.