ETF XRAY

Why Not a Finland ETF?

By Carl Delfeld of the Chartwell ETF Advisor

For all their flaws, country-specific exchange-traded funds have captured the imagination of global investors. Why not one for Finland?

Mr. Vesa Vihriälä, the Secretary General of the Economic Council of Finland notes in a letter to the Financial Times that gross domestic product grow by 5 per cent in 2006, growth averaged 3.3 per cent in 2000-2006, which is well above the European Union and OECD averages of 2.0 and 2.5 per cent, respectively. Finland's GDP per capita, adjusted for purchasing power parity, ranked 10th in 2006 according to Groningen University, surpassing that of Germany, the UK, France, Sweden and Austria. Finland's unemployment rate has already fallen to 6.5 per cent and is set to decline further given the projected GDP growth.

No doubt Finland faces many challenges such as an aging population, less than stellar in commercializing innovations, limited success in attracting foreign talents and direct investment, weak productivity in the services sector, and inflexible labor markets.

Finland's most visible company, Nokia, also highlights the hybrid nature of most country ETFs. It would dominate a market cap weighted Finland ETF but is hardly tied to the Finnish economy but rather is very much a play on global growth and development. China is its biggest market, followed by India and then the United States. From its plants in India, Nokia ships products to more than 50 countries!

Find out more about Chartwell's World Country ETF Rotation Portfolio

Nokia's Role in International Communications ETF (DGG)

Nokia, a top holding in the Wisdom Trees International Communications exchange-traded fund (DGG), declared an important strategic shift with the announcement of an online music service intended to rival Apple’s iTunes. The Financial Times discussed how this move fits into Nokia's long term strategy.

Nokia also announced that India has become its second-biggest market after China pushing the US into third place. Mobile phones and other telcom services have been one of the fastest growing areas of emerging markets and Nokia sees no let up. One plant located in Chennai, India has shipped a remarkable 60 million Nokia phones to 58 countries! Nokia is now shipping more than 100 million phones worldwide each quarter.

Nokia is ranked as the fifth largest holding in the ETF with a 4.3% weighting. The UK, Spain and Hong Kong collectively account for 43% of the companies inside the ETF basket.

By Carl Delfeld of the Chartwell ETF Advisor