Guide to Investing in Belgium
Belgium is widely known for its centralized location that has made it a highly desirable industrial and commercial base in the European region. In fact, the country's capital city - Brussels - is the de facto capital of the European Union and a principal center for international politics. And as the 33rd largest economy in the world by Purchasing Power Parity, many international investors are very familiar with the country and the many multinational companies that it houses.
In this article, we'll take a look at the Belgian economy and how U.S. investors can build exposure into their portfolios using exchange-traded funds ("ETFs") and American Depository Receipts ("ADRs").
Belgium's economy is characterized by its diversified industrial and commercial base, although nearly three-quarters of its gross domestic product ("GDP") is accounted for in services. While the economy has traditionally been considered wealthy, the government has been lax on collecting taxes in the past, which has led to high government debt in the 1980s. These levels have subsided significantly since then, but it still has a debt-to-GDP ratio of almost 100%.
Approximately 80% of Belgium's trade is conducted with other members of the European Union, which has also made its economy rather dependent on the region's health. The company has a strong heavy industry, which has made its growth more robust than other members of the regional economy, but its ties to world trade make it susceptible to economic swings, particularly during the 2009-2010 European sovereign debt crisis.
Exchange-traded funds ("ETFs") offer U.S. investors an easy way to gain exposure to foreign economies. Since each ETF holds numerous foreign companies or other asset classes, investors can purchase diversified exposure with a single U.S.-traded security. Many ETFs also have lower expense ratios and greater liquidity than mutual funds and other options for U.S. investors to gain exposure to foreign economies and/or companies.
The iShares MSCI Belgium Capped ETF (NYSE: EWK) is the most popular Belgium ETF, with about $63.5 million in total net assets, as of September 2013. With an expense ratio of just 0.5%, investors can gain exposure to numerous popular Belgian companies, including Anheuser-Busch InBev, KBC Groep NV, and more than 40 other companies. The ETF is weighted about 30% in consumer staples and 28% in financials, with a 22% position in Anheuser-Busch InBev.
Other ETFs with Begian exposure include:
American Depository Receipts ("ADRs") offer another way for U.S. investors to build exposure to foreign economies into their portfolios. By purchasing a bulk lot of foreign securities, U.S. banking institutions can bundle them into securities that can be reissued on U.S. stock exchanges like the NYSE or NASDAQ. These securities, known as ADRs, are traded just like traditional U.S. stocks, but might entail additional tax implications.
The most popular Belgian ADR is Anheuser-Busch InBev SA (NYSE: BUD), which has a market capitalization of about $154 billion, as of September 2013. Between 2008 and 2013, the alcohol and beverages company grew its revenues from about $23.5 billion to more than $40 billion, with net income rising from about $1.9 billion to over $13 billion. Income investors may also appreciate the company's stable dividend yield of around 2.2%.
Additional Belgian ADRs include:
Belgium offers international investors a unique opportunity to capitalize on the growth of one of Europe's most dynamic economies. With companies like Anheuser-Busch, investors also benefit from multinational exposure when investing in its ETFs and ADRs. However, investors should be aware of the many risks involved with investing in Belgium, including its exposure to the European Union's economic slowdown, given its ties to the region.
In this article, we'll take a look at the Belgian economy and how U.S. investors can build exposure into their portfolios using exchange-traded funds ("ETFs") and American Depository Receipts ("ADRs").
Belgium's Growing Economy
Belgium's economy is characterized by its diversified industrial and commercial base, although nearly three-quarters of its gross domestic product ("GDP") is accounted for in services. While the economy has traditionally been considered wealthy, the government has been lax on collecting taxes in the past, which has led to high government debt in the 1980s. These levels have subsided significantly since then, but it still has a debt-to-GDP ratio of almost 100%.
Approximately 80% of Belgium's trade is conducted with other members of the European Union, which has also made its economy rather dependent on the region's health. The company has a strong heavy industry, which has made its growth more robust than other members of the regional economy, but its ties to world trade make it susceptible to economic swings, particularly during the 2009-2010 European sovereign debt crisis.
Investing in Belgium with ETFs
Exchange-traded funds ("ETFs") offer U.S. investors an easy way to gain exposure to foreign economies. Since each ETF holds numerous foreign companies or other asset classes, investors can purchase diversified exposure with a single U.S.-traded security. Many ETFs also have lower expense ratios and greater liquidity than mutual funds and other options for U.S. investors to gain exposure to foreign economies and/or companies.
The iShares MSCI Belgium Capped ETF (NYSE: EWK) is the most popular Belgium ETF, with about $63.5 million in total net assets, as of September 2013. With an expense ratio of just 0.5%, investors can gain exposure to numerous popular Belgian companies, including Anheuser-Busch InBev, KBC Groep NV, and more than 40 other companies. The ETF is weighted about 30% in consumer staples and 28% in financials, with a 22% position in Anheuser-Busch InBev.
Other ETFs with Begian exposure include:
- International Hedged Equity Fund (NYSE: HEDJ)
- S&P Global Dividend Opportunities Index ETF (NYSE: LVL)
- SPDR S&P International Consumer Staples Sector ETF (NYSE: IPS)
Anheuser-Busch & Other Belgian ADRs
American Depository Receipts ("ADRs") offer another way for U.S. investors to build exposure to foreign economies into their portfolios. By purchasing a bulk lot of foreign securities, U.S. banking institutions can bundle them into securities that can be reissued on U.S. stock exchanges like the NYSE or NASDAQ. These securities, known as ADRs, are traded just like traditional U.S. stocks, but might entail additional tax implications.
The most popular Belgian ADR is Anheuser-Busch InBev SA (NYSE: BUD), which has a market capitalization of about $154 billion, as of September 2013. Between 2008 and 2013, the alcohol and beverages company grew its revenues from about $23.5 billion to more than $40 billion, with net income rising from about $1.9 billion to over $13 billion. Income investors may also appreciate the company's stable dividend yield of around 2.2%.
Additional Belgian ADRs include:
- Delhaize Group (NYSE: DEG)
- Ageas SA (OTC Markets: AGESY)
- Galapagos NV (OTC Markets: GLPYY)
Risks & Other Considerations
Belgium offers international investors a unique opportunity to capitalize on the growth of one of Europe's most dynamic economies. With companies like Anheuser-Busch, investors also benefit from multinational exposure when investing in its ETFs and ADRs. However, investors should be aware of the many risks involved with investing in Belgium, including its exposure to the European Union's economic slowdown, given its ties to the region.
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