Market Vector Gulf States (MES) gives easy access to the gulf states of Bahrain, Kuwait, Oman, Katar and United Arab Emirates.

The fund’s expense ratio is 0.50%, with total net expenses at 0.98%. The ETF tracks the Dow Jones GCC Titans 40 Index. The Gulf region has been on a run, thanks to high energy prices. The spending on infrastructure and urbanization is growing and sustainability will only be known in the future.

The top country weightings are: Kuwait, 52.3%; United Arab Emirates, 25.9% and Qatar, 14.9%. Banks are the most well-represented sector, with 38.5% of the holding. Financial services follow at 21.6%; real estate is 10.5%.

This fund comes on the heels of the WisdomTree Middle East Dividend Fund (GULF), which shares a similar makeup. The top countries are Kuwait, 27.2%; United Arab Emirates, 16.9%; Qatar, 16.5%. Financials is the top sector, with 51.6%, while telecommunications comes next with 24.7% of the holdings.

The Middle East has been a hot place lately, for both temperature and ETF attention:

• iShares MSCI Israel Capped Investable Market Index (EIS)
• iShares MSCI Turkey Investable Market Index Fund (TUR)
• SPDR S&P Emerging Middle East & Africa (GAF)
• Claymore/BNY Mellon Frontier Markets ETF (FRN)
  

The WisdomTree Middle East Dividend Fund (GULF) covers the same region as S&P’s GCC40 Index, which has no ETF yet associated with it, reports ETF Guide.

The underlying index is the WisdomTree Middle East Dividend Index, which is fundamentally weighted, and measures the companies domiciled in the region that pay regular cash dividends on shares of common stock.

One hundred companies are included, based upon market capitalization and no country represents more than 33%. At re-balancing, companies must have paid out $5 million in cash dividends for the cycle prior to the next one.

The Middle East has become one of the most attractive areas in the world for investors to access, as emerging markets become more correlated with developed ones. The Middle East, in particular, is drawing interest because of its potential for growth, as well as the fact that it has largely sat out the troubles that rising energy prices have caused around the rest of the world.

WisdomTree’s Director of Research Luciano Siracusano says that it’s the only real region where stocks have gone up uniformly in recent years.

The economies there are more than just oil, too. There’s increasing diversification in the economy, an improving legal framework, an effort made to diversify the economy and a younger urban population. The economies have also started to become integrated into global banking within the last three to five years.

Companies eligible for index inclusion must be incorporated in and have their shares listed on a major stock exchange in Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar or the United Arab Emirates (including Abu Dhabi and Dubai). The fund comes with an expense ratio of 0.88% and is 36% weighted in banking, followed by telecommunications (25%).

This fund is just the latest in a series to launch that offer access to the Middle East, including:

• PowerShares Frontier Portfolio (PMNA)
• Market Vectors Africa Index (AFK)
• Claymore/BNY Mellon Frontier Markets (FRN)
• iShares MSCI Israel Cap Investable Market (EIS)
• NETS TA-25 Index Fund (TAV)
  

The Chicago Board Options Exchange (CBOE) unveiled the Crude Oil Volatility Index (VIX) yesterday, just in time for the commodity’s largest one-day price drop in 17 years.

The index is tied to options of the United States Oil Fund (USO), which holds oil futures. If the index surges, it generally signals an increase in prices, says Tennille Tracy for the Wall Street Journal. However, not always: Tuesday’s dramatic drop in oil prices sent the index higher by 7.7%. VIX tends to move inversely to the stock market.

USO is up 55% year-to-date.

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.

Claymore this morning is expected to launch the Claymore BNY/Mellon Frontier Markets ETF (FRN), the first fund of its kind. It’s made up of American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs).

Claymore President Christian Magoon told us that he feels this
untapped area of the world has a lot to give. "They offer a lot of
return and risk potential, and there’s a low correlation to developed
and emerging markets."

One issue with emerging markets, he points out, is that as they
emerge, they tend to correlate more and more closely with developed
economies – that’s not always necessarily a great thing.

The Bank of New York Mellon came up with five criteria for what
constitutes a "frontier market," and 41 countries could be classified
as such. From that, 15 countries on four continents met the criteria
for inclusion in the actual index, which were a minimum share price of
$3, market capitalization of $100 million and trading volume of 10,000
shares a day.

The top countries represented in the fund will be Poland, Chile,
Egypt, Kazakhstan, Peru and the Czech Republic. It rebalances
quarterly, and Magoon says that new stocks may be added to the fund as
they become eligible. For example, Vietnam doesn’t have any stock that
meets the criteria, but when it does, it could be added.

Different index providers have varying criteria on what a "frontier
market" is, Magoon says. For example, based on their definition,
Goldman-Sachs defines 11 countries as frontier markets. Standard &
Poor’s defines 37, and Merrill Lynch defines 17. Of the Bank of New
York/Mellon index, "We believe it’s the broadest frontier market in the
world."

The index allows for a range of frontier markets, some in the early
stages of frontier, while others are closer to the "emerging" side of
things.

This long-awaited ETF could be as interesting to watch as the countries it tracks.

Also anticipated is the PowerShares MENA Frontier Countries Portfolio (PMNA). Around 50 companies will be part of the underlying index and a majority of the assets will be in Nigeria, Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and United Arab Emirates.

WisdomTree has filed for a Middle East Dividend Fund, which includes exposure to Bahrain, Dubai, Egypt, Jordon, Kuwait, Lebanon, Morocco, Oman, Qatar and the United Arab Emirates. Although the prospectus does not list the weightings, Roger Nusbaum for Seeking Alpha says he found that 54% of the market caps are greater than $2 billion.

Frontier markets are the next category that will offer investors opportunity, and the Middle East is ripe for the taking. PowerShares also has a frontier fund in the making, so it is time that we see more of these funds coming to market.

Other ETFs that currently offer exposure to this area of the globe:

• iShares MSCI Israel Capped Investable Market Index Fund (EIS), up 7.6% since March 28 inception
• iShares MSCI Turkey Investable Market Index Fund (TUR), up 4.5% since April 1 inception
• SPDR S&P Emerging Middle East & Africa (GAF), down 1.3% year-to-date

On Monday, Invesco PowerShares registered to launch a new ETF that would focus on companies domiciled in 10 Middle Eastern and North African countries, reports Jeffrey Ptak for Morningstar.
 

The index is not yet named and the ETF is pending. But it will be called the PowerShares MENA Frontier Countries Portfolio. Around 50 companies will be part of the underlying index and a majority of the assets will be in Nigeria, Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and United Arab Emirates.

This puts PowerShares in a race with Claymore for an ETF tracking frontier markets. The Claymore/BNY Frontier Select DR Index Fund would track an index of 26 companies from a universe of 40 frontier markets.

When they launch, the ETFs will join the SPDR S&P Emerging Middle East and Africa (GAF). The fund is allocated primarily in South Africa, at 55.3%. It also has weightings in Israel (21.4%), Morocco (7.1%), Egypt (5.7%) and Jordan (3.6%). Year-to-date, the fund is down 2.3%.

iShares last month also gave more Middle East exposure to investors with the launch of the iShares MSCI Israel Capped Investable Market Index Fund (EIS).

Carl Delfeld for ETFfolio did the research and found data on overseas stock markets from Portfolio magazine. The numbers make one wonder where the ETFs for some of these markets are.

The Kuwait Stock Exchange is up 486% over the last five years. It has a $106 billion market cap and 190 listed companies. The Nairobi Stock Exchange has a $10.7 billion market cap, 58 listed companies and is up 400% in the same period.

Compare that with the Dow, which is up 50%, and the FTSE 100, up 42%, in the same time span.

Shariah requires strict rules be followed in the way a Muslim follower lives life and the manner in which commerce is conducted. Businesses involved in advertising or the media are strictly prohibited.  Other areas banned include alcohol, gambling, pork, conventional financial services, tobacco, pornography, gold or silver trade. In the Muslim faith, profit from lending money or property rental income is immoral; one must rely on equity and profit to make money.