The Frontier Becomes More Vast With PowerShares’ ETF
July 9th, 2008 at 11:00am by Tom Lydon
Invesco PowerShares announced the listing of its frontier countries exchange traded fund (ETF). The PowerShares MENA Frontier Countries Portfolio (PMNA) began trading this morning.
The fund was designed to give access to the Middle East and North Africa. Its heaviest weighting is in Kuwait, with 19.7% of assets, followed by United Arab Emirates (19%), Egypt (16.1%), Qatar (14.5%) and Morocco (12.2%).
Financials are the heaviest sector in the fund, at 56.1% of the assets. Telecommunications is in second, at 16.5%, followed by industrials, at 15.4%. The fund carries a 0.95% expense ratio.
There are certain foreign investment ownership limitations to be encountered upon investing in the Middle East and North Africa. PMNA represents a quality tool for accessing these hard to reach areas of the global marketplace.
This fund’s makeup differs from the other frontier markets ETF, the Claymore/BNY Mellon Frontier Markets (FRN), which is spread out across Eastern Europe, Latin America, Northern Africa and the Middle East. Its top country weightings are Poland (23.5%), Chile (21.4%) and Egypt (17.4%). The top three sectors are financials (39.8%), materials (14.5%) and telecommunications (14.3%). It comes with a 0.65% expense ratio.
Depending on which area of the frontier you’d like to access, these funds are different enough to give investors some interesting options. Investor interest in frontier markets has never been stronger, says John H. Christy for Forbes. Africa has made some promising strides in the development of its equity markets. In 1989, there were five sub-Saharan stock exchanges, and now there are 16. Christy says there is reason to be optimistic about Africa’s long-term prospects, but there’s still a lot of work to be done.
That’s likely a big reason why investors are turning an eye toward the frontier – the prospect of growth on top of growth is becoming more appealing as emerging markets become more correlated with developed ones. Just bear in mind that with increased reward potential comes increased risk.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.