Sovereign Debt Woes Could affect iShares ETFs – (ILF and EMM)
Submitted by Big Bear on December 18, 2009 – 10:23 amNo Comment
An article on thestreet.com discusses Dubai’s debt woes and the potential trickle-down to iShare ETFs ILF and EEM.
The most recent worries about Dubai World and its ability to pay its debts has opened up a whole new can of worms and has many questioning whether the delinquencies of sovereign debt could potentially put a damper on a global economic recovery.
Sovereign debt is the total amount of sovereign bonds, which are bonds issued in foreign currencies, owed to bond holders. In general, the issue of delinquencies in these bonds, or type of debt, arises when a nation cannot afford to repurchase the necessary foreign currency when the bonds mature and repayment is due.
With this in mind, some equities that may be affected by delinquencies in sovereign debt include:
- The iShares S&P Latin America 40 Index (ILF Quote), which has more than doubled from a March low of $21.64 to close at $46.93 on Thursday. Mexico comprises nearly 22% of the total assets of ILF.
- The iShares MSCI Emerging Markets Index (EEM Quote), which is up 102% from a March low of $19.94 to close at $40.40 on Thursday. Nearly 26% of EEM’s asset base is allocated to Latin America.
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