The rising intensity of unrest in Egypt has forced the Market Vectors Egypt (NYSEArca: EGPT) exchange traded fund (ETF) to suspend share creation.
Egypt’s stock exchange has closed down for an indefinite period as a result of the protests. Van Eck’s decision to suspend share creation helps prevent the costs of creation activity from being passed on to current fund shareholders.
Redemptions will continue as normal, the provider says, and creations will resume when the Egyptian Stock Exchange reopens.
EGPT isn’t the only Middle East-focused ETF impacted by the violence. In fact, the uprising has many investors fleeing for safety in more stable markets. Middle East ETFs were sold off aggressively last week as investors grew worried about the long-term impact on such funds. [The Growth Opportunity of Middle East ETFs.]
ETFs with a significant weighting in Egypt were all affected:
- SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): lost 6.1% last week
- WisdomTree Middle East (NYSEArca: GULF): lost 3.2% last week
- Market Vectors Gulf States (NYSEArca: MES): lost 4.1% last week
- PowerShares MENA Frontier Countries (NYSEArca: PMNA): lost 5.9% last week
According to CNBC on Yahoo Finance, one strategist called “a typical flight-to-quality market” in which investor fear is rekindled over geopolitical risk. [Sate Your Risk Appetite with Frontier Market ETFs.]
If uncertainty continues to plague the market, there may be a trend away from frontier markets and into safer sectors. However, don’t give in to fear and sell before you had intended to or before your sell signal has been struck. A sound and easily implemented exit strategy can be a helpful defense against market instability.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.