ETF Investors Confident On Europe Recovery As Portugal Ends Banking Woes

August 05, 2014

The looming Portuguese banking crisis came to halt on Monday as Portugal intervened to prevent to collapse of one of its biggest banks, Espirito Santo.  While the news immediately perked European stocks up and pushed bond yields down, the three exchange traded funds tracking Portugal showed that July had the highest month of inflows this year as investors remained confident of a Southern Europe recovery.

Banco Espirito Santo lost over half of its value in June/July on fears that the financial difficulties at the Espirito Santo Group will engulf the bank and prompt a banking crisis in Europe. But, the Portuguese government announced a $3.8 (€5) billion rescue of the bank yesterday easing systemic fears.

According to data from Markit, July inflows into the three equity ETFs tracking Portugese underlyings hit $16.8 million in asset flows in July - the highest inflow in the last six months.

There are two ETPs benchmarked to the PSI 20 index on European exchanges, which have seen their AUM jump by 50 percent since the start of the year with just over $50 million of inflows.

- The Comstage ETF PSI 20 UCITS ETF tracking NYSE Euronext PSI 20, Total Gross Return.

- The Comstage ETF PSI 20 Leverage UCITS ETF tracking NYSE Euronext PSI 20, Leverage, Price Return

Of the two that focus on Portugal only, the largest ETF, Comstage ETF PSI 20 UCITS ETF now has about $80 million in assets under management.

Thomas Meyer zu Drewer, head of ComStage ETFs, said: “We see continued interest and activities from investors. In our view, there are two reasons driving clients: Many money managers expect that Southern Europe's recovery continues, and investors seem to recognize (short-term) potential once the crisis around Espirito Santo is over. As far as we hear from partners in Portugal, Espirito is seen as a single and outstanding event.”




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