But that’s not keeping investors away. Rebalancing of local economies or strengthening activity in Europe – Europe is a major trading partner for some Middle Eastern countries – may bring investors back to the Islamic Triangle markets. Egypt, with its strong asset quality as supported by its stronger banking sector, seems to be leading the region.
The Gulf has continued to beat the odds laid out by the global financial crisis and continues to gain capital from foreign investors. Even after a sovereign debt scare from Dubai, international companies still see the country as a stepping-stone into the MENA region. Saudi Arabia is the largest foreign direct investment location for the area, followed by the United Arab Emirates.
The Outlook for the Region
The appeal of the Middle Eastern countries come from the fact that their energy-driven profits will help energize growth in other sectors, such as infrastructure and health care, and provide an overall better quality of life for all their citizens.
- The region has a young population. The youth ages 15 to 24 in the Islamic Triangle make up 30% of the population, or twice the proportion in the developed world.
- However, the Middle East and North Africa are home to some of the highest youth unemployment rates at 23% to 24%.
- The Islamic finance sector is also a dominating factor that will further aid the service industry, with principles of sharing risk and avoiding speculation.
One of the biggest risks of investing in the region is that it depends heavily on oil prices being high in order to generate income. There are also geopolitical risks, thanks to ethnic and political clashes.
Despite those risks, however, observers remain bullish on the region for the long-term, pointing to the fact that Africa/Middle East region is on the verge of becoming a collective of industrial economies.
The broader Middle East does face a few other upward battles, but as the markets there become fortified and the foreign investment continues, the region will attract more fund investors.
Middle East ETF Options
ETFs are a good way to get exposure to this volatile and politically sensitive region of the world, thanks to the risk-mitigating qualities of these stock baskets. Currently available broad-based Middle East ETFs can help mitigate your exposure to risk by being allocated across a number of countries instead of focusing on just a single country.
One of the biggest benefits of MENA ETFs are their ability to give investors low-cost, liquid and diversified exposure to an area of the world that would otherwise be challenging to access. Luckily for investors, a number of new funds aimed at this dynamic area of the world have launched in recent years.
To research any of these ETFs, visit the ETF Resume. As a Pro ETF Trends subscriber, you also have access to powerful tools like alerts, the watchlist and custom portfolios. Be sure to use them to research these and other areas of the world!