Over the last 10 days, Market Vectors Egypt (NYSEArca: EGPT) exchange traded fund (ETF) has lost nearly 8% of its value. Protests in the capital city could keep EGPT and other Africa-centric ETFs from making big upward moves anytime soon.
The protesters are bent on using the momentum built up in Tunisia to effect political change in their own country, says CNN. The frustration over a rising cost of living, poor economic policies and government corruption has spilled out to both young and old, who showed up to express that anger.
The protests come at a time of increasing strength in the Egyptian economy, but they also show how much work is left to be done:
- The International Monetary Fund estimates that Egypt’s economy will expand 5.8% for 2010 and 6% for 2011 while the Egyptian government says the economy will grow 6.2% this year and 8% next year, reports Marwa Hussein for Ahram Online.
- IMF officials remark that Egypt will need to fix its inflation, high public debt, budget deficit, a 9% unemployment rate and a distending income distribution that could cause further unrest.
- While Egypt has made progress in producing economic growth over the years, employment rates and lower poverty rates have not kept up with the rising growth, according to the Associated Press.
Egypt is a classic emerging market: it’s growing, and quickly, but there are still a lot of kinks left to be worked out. If the protesters can ultimately help push changes in the country through, ETFs that have a heavy allocation to Egypt could see the benefits of those shifts. In the short-term, however, Egypt could be a weight on ETFs that own it.
For more information on Egypt, visit our Egypt category.
- Market Vectors Egypt (NYSEArca: EGPT) is the only pure-play Egypt ETF available right now; iShares and Global X have Egypt funds in registration.
- Market Vectors-Africa (NYSEArca: AFK) has an 18.6% allocation to Egypt.
- PowerShares MENA Frontier Countries (NYSEArca: PMNA) has an 18.9% allocation to Egypt.
- Guggenheim Frontier Markets (NYSEArca: FRN) has a 13.2% allocation to Egypt.
- WisdomTree Middle East Dividend (NYSEArca: GULF) has a 10.6% allocation to Egypt.
Max Chen contributed to this article.
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.