Berating Brussels: Trouble Awaits Belgium ETF Post-Downgrade

It gives us no satisfaction to say we told you so, but we did mention the iShares MSCI Belgium Investable Market Index Fund EWK as being in a tough spot toward the end of November. At Friday's close EWK rested a whole 24 cents above where it was when we opined that Belgium stood a fair chance of being European's next domino to fall in what is becoming a dizzying array Euro Zone problem children. As we noted last month, Black Friday really was Black Friday for Belgium's credit rating as Standard & Poor's pared its rating on Belgium one level to AA. Well, Moody's Investors Service got in on the Belgium beating today, paring the country's rating to Aa3, with a negative outlook, from Aa1, citing funding risks in the Euro Zone. “The first driver underlying Moody's decision to downgrade Belgium's debt rating is the fragile sentiment surrounding sovereign risk in the euro area," the ratings agency said. Obviously, this is bad news for EWK, which is currently trading around levels not seen since mid-2009. And as we noted last month, EWK's situation is far less murky. If psychological support at $10 is violated and the Euro Zone crisis continues and it looks like it will, we're talking about an ETF that could easily see the $7-$8 area sooner rather than later. EWK has been such a stinker this year, so much so that it has been easily outperformed by the iShares MSCI Spain Index Fund EWP and the iShares S&P Europe 350 Index Fund IEV. Yeah, really and it looks like things are about to get worse for Belgium and its corresponding ETF.