Denmark ETF Decked by Novo Nordisk's Slide

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By ETF Professor | February 12, 2013 3:53 AM EST

Shares of the rarely discussed iShares MSCI Denmark Capped Investable Market Index Fund (BATS: EDEN) are off by 3.2 percent Monday in what is shaping up to be one of the worst-one day performances for the 13-month old fund.

The catalyst for EDEN's woes is easy to spot. EDEN features an almost 23.3 percent allocation to Danish pharmaceuticals giant Novo Nordisk (NYSE: NVO).

Shares of Novo Nordisk are plunging by nearly 14 percent Monday after the U.S. Food and Drug Administration declined approval of the company's applications for insulin Tresiba and Ryzodeg. The FDA requested additional cardiovascular trial data, something Novo Nordisk does not expect to be able to provide this year, according to MarketWatch.

At almost 23.3 percent of EDEN's total weight, Novo Nordisk is more than triple the size of the ETF's next largest holding, Danske Bank. Overall, health care names represent almost 36 percent of EDEN's weigth, providing an additional drag on the $3.5 million dollar ETF today. That allocation is well ahead of the ETF's next largest sector weight, which is 22.3 percent to industrials.

This is not the first time a Nordic ETF has suffered at the hands of large weight to just one stock. Last year, the iShares MSCI Finland Capped Investable Market Index Fund (BATS: EFNL) had some struggles due to a large allocation to Finnish mobile phone giant Nokia (NYSE: NOK).

In fairness to EDEN, it is not the only ETF with a large weight to Novo Nordisk that is struggling today. The Global X FTSE Nordic Region ETF (NYSE: GXF), which has an almost 13.7 percent weight to the pharmaceuticals giant, is lower by 1.72 percent on volume that is already more than double the daily average. GXF's weight to Novo Nordisk is more than double the six percent the ETF allocates to Swedish mobile phone firm Ericsson (NASDAQ: ERIC).

Even with today's loss, EDEN has been a stellar performer since its late January 2012 debut, returning 30 percent in that time. GXF has been solid as well, returning 19 percent in the past year, including today's loss.

For more on ETFs, click here.

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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