After 18 days of intense and sometimes violent protests, Egyptian President Hosni Mubarak ceded power to the country’s military. Within minutes, Market Vectors Egypt (NYSEArca: EGPT) exchange traded fund (ETF) jumped up 6% and trading volume roared.
It’s not the only ETF that saw a nearly immediate positive response. ETFs with exposure to Egypt saw gains, though they were more tempered than what’s going on in Market Vector’s Egypt pure play:
- PowerShares MENA Frontier Countries (NYSEArca: PMNA) is up nearly 1% so far today, the most of any of the broad funds. It has an 18.9% allocation to Egypt.
- Guggenheim Frontier Markets (NYSEArca: FRN) is up 0.4% so far today. It has a 13.2% allocation to Egypt.
- WisdomTree Middle East Dividend (NYSEArca: GULF) is also up nearly 1% early on. It has a 10.6% allocation to Egypt.
What does this mean for ETFs with a lot of exposure to Egypt? It’s hard to say this early, but a few things we’re watching out for:
- The cost of insuring Egyptian government debt dropped 0.24% after the resignation. There’s a measure of confidence now that there’s a little more certainty about the direction in which Egypt is heading. That confidence could translate into an influx of cash into the Egyptian economy as more intrepid investors snap up government debt.
- The Egyptian stock market could reopen soon. That means that Market Vectors could resume share creation for EGPT, which it had suspended recently as a result of the market’s shutdown. [5 ETF Lessons from Egypt Protests.]
- Some volatility as the transfer of power plays out could be expected. EGPT may be jumping today, but it’s reacting sharply to any news that trickles out of the country. Just look at this chart:
The fund gained for much of the day yesterday on reports that Mubarak would resign before dropping sharply after he said he wouldn’t.
If you’re an investor in this fund trying to profit from the revolution in Egypt, be sure you’re armed with an exit strategy, because the situation still has a lot of time left to play out.
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.