The Middle Eastern region is influencing world affairs and exchange traded funds (ETFs) in a big way as global economic development becomes more and more tied to the region’s copious reserves of hydrocarbon resources.
Since 2000, the Middle East has seen growth above 5% and has become the second richest part of the emerging world, according to ETF Grind. But Mideast economies were slower to recover in the beginning of 2009 and there were concerns over the ability of the region to pay down debt accumulated in the good years.
Over the long-term period, there are several ETFs that an interested investor could keep an eye on:
- iShares MSCI Turkey Invest Mkt Index (TUR): up 30.9% year-to-date. Turkey’s economy isn’t tied too heavily to oil. It remains dependent on exports to the EU. The country’s industrial sector can profit from its close proximity to oil producers.
- Market Vectors Agribusiness ETF (MOO): up 36.6% year-to-date. Economic develpment and population growth would make the Middle East would effect global food demand more than elsewhere since the region has little arable land. Middle Eastern countries are already securing land for a steady food supply and will need the necessary equipment and supplies.
- PowerShares Global Water (PIO): up 10.8% year-to-date. Needless to say, the region has a scarcity of freshwater. The Middle East has the biggest market for desalinization plants and expensive water engineering projects. PIO holds 29 global water resource firms.
- Market Vectors Gulf States ETF (MES): up 15.4% year-to-date. MES covers Middle Eastern countries that border the Persian Gulf. It is weighted toward finance, real estate and services. Its expense ratio is 1.00, but it is a pure play on oil related economies.
- iShares MSCI Israel Cap Invest Mkt Index (EIS): up 33.5% year-to-date. Israel has reputable pharmaceutical and tech sectors.
- Claymore/Robb Report Global Luxury (ROB): up 13.3% year-to-date. When crude oil rises again, Middle Eastern royals will be swiping their super platinum cards in purchasing luxury goods.
- PowerShares MENA Frontier Countries (PMNA): up 15.9% year-to-date. PMNA is similar to GULF but excludes gulf nations of Qatar, Bahrain, and Oman. It also has a higher expense ratio. It is broadly diversified with Morocco and Egyptian firms. The fund mainly invests in large and mid caps.
- Claymore/Delta Global Shipping (SEA): up 31.8% year-to-date. Recovery in oil prices and Middle East production could translate into strong earnings for global shippers. Crude oil makes up aruond 1/6 of global trade.
- WisdomTree Middle East Dividend (GULF): up 8.4% year-to-date. GULF has a broad market Middle East and North Africa exposure. It has a wider selection of holdings than PMNA or MES, a lower expense ratio, and is dividend weighted rather than capitalization weighted. But the funds competition, GULF is a little low on volume.
- iShares Dow Jones U.S. Oil Equipment Index (IEZ): up 39.7% year-to-date. Major equipment and service companies included in this fund have business in the Middle East. IEZ has outperformed crude oil ETFs and indexes of major integrated oil companies year-to-date.
As always, watch the trend lines to see what actually materializes.
For more stories on the Middle East, visit our Middle East category.
For full disclosure, Tom Lydon’s clients own shares of MOO.
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.