Sweden ETF Jumps On QE Hopes

September 03, 2014

The Swedish Central Bank may go to extraordinary measures to pump up falling prices.


Chart courtesy of StockCharts.com

The iShares MSCI Sweden ETF (EWD | A-94) is rising today in hopes that the Riksbank will unleash its first-ever quantitative easing program. Members of the Swedish Central Bank have been explicit in their emphasis on meeting their 2 percent inflation target.

To that end, the Riksbank's policies have failed thus far: According to Bloomberg, inflation fell to 0.02 percent after the central bank lowered its key rate to 0.25 percent in July. With rates already low, the central bank is running out of room to stimulate inflation through rate cuts, which has some analysts anticipating a turn toward quantitative easing.

In the same Bloomberg article, the chief economist of Sweden's largest mortgage lender says, "We're not excluding the possibility that the Riksbank implements quantitative easing if inflation slows and inflation expectations continue to stay low."

The Sweden ETF, EWD, captures the top 85 percent of the Swedish market by holding a basket of roughly 30 Swedish companies. The fund is efficient, liquid and, with a P/E of 13.4, is more competitively priced than American equities (SPY has a P/E of 18.6).

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