Some emerging markets stocks and exchange traded funds have recently shown signs of improvement, but real strength continues to be seen in Middle East markets – namely Qatar and the United Arab Emirates.
Those markets combine for 58% of the WisdomTree Middle East Dividend Fund (NasdaqGM: GULF), helping explain why this previously obscure ETF has recently been gaining prominence. An almost 42% gain over the past year while traditional emerging markets benchmarks have flailed is lifting GULF from the ranks of overlooked ETFs.
GULF tracks the WisdomTree Middle East Dividend Index (WTEMME), which is not only dividend-weighted, but includes only companies that can be purchased by foreign investors. The index is home to 74 companies as of Feb. 10, though GULF currently holds 70 stocks. Over 88% of the WisdomTree Middle East Dividend Index’s holdings are either large- or mid-caps and the index has a total market value of $370 billion, according to WisdomTree data.
The WisdomTree Middle East Dividend is extending its gains, soaring to new all-time highs along the way.
“The Index finished the most recent calendar year with a gain of over 37%, putting it at an all-time high and pushing its cumulative return since inception into positive territory for the first time. Year-to-date, WTEMME continues to forge new highs, up close to 10.5%, outperforming both the S&P 500 and MSCI EM by over 10% and almost 16%, respectively,” said WisdomTree Research Director in a new research note.
A frequently voiced concern during the rally in shares of Qatar and UAE-listed companies is that stocks in those countries have become richly valued, a scenario that some market observers argued was exacerbated when investors rushed into those markets following last year’s news that UAE and Qatar will be promoted to emerging markets from frontier markets status. However, it is worth noting stocks in Qatar and UAE, while in rally mode, have not run back to their pre-global financial crisis highs. [Go With GULF]