Around the world, international economies are showing life again and investors are accepting a little more risk in their portfolios. But investors looking at Middle East markets and exchange traded funds (ETFs) have been pushed away amid an uncertain economic and social outlook for the region.
As the global markets recovered, foreign investors slowly trickled back into the Middle East late last year, but the recent uprisings scared away investors who are concerned over the instability and volatility in the region, reports Sara Hamdan for The New York Times.
The Middle East is still a great opportunity for growth as oil exports make up a major stake in the region, and the corporate landscape is just blossoming, but in need of outside resources. [Middle East ETFs Tumble Amid Spreading Unrest.]
ETF Daily News states that there are some ways to monitor the situation in the Middle East through real-time instruments, which could help determine where the opportunities lie:
- Social Networks. Twitter and Facebook have been invaluable tools in getting real time information from the region.
- Credit default swaps. The Markit CS page offers listings of sovereign default risk, which has shown increased spikes in default risk for Bahrain, Qatar and Egypt.
- ETFs. While it may not be prudent to invest in individual countries in the region, investors may pick out energy ETFs that have capitalized on the uncertainty, or other Middle East related ETFs that hold companies with exposure to crude oil.
- ADRs. American Depository Receipts, stocks that trade on U.S exchanges based overseas, of Middle East corporations may have some opportunities for shorting or purchasing at cheap prices.
- Safe bets. Well-established indexes like the S&P 500 and the NASDAQ have actually offered stability in these tumultuous times.
For more information on the Middle East, visit our Middle East category. Fortunately, most Middle East ETFs have little, if any, exposure to spots where the tensions are greatest right now. Unfortunately, they’re at risk of becoming collateral damage if the situation continues to intensify.
WisdomTree Middle East (NYSEArca: GULF) is heaviest in Qatar and Kuwait and it’s down 10.2% in the last month. Market Vectors Gulf States (NYSEArca: MES) also are most heavily allocated to Kuwait and Qatar, while Bahrain makes up a scant 0.4%. It’s down 12.6% in the last month. PowerShares MENA Frontier Countries (NYSEArca: PMNA) counts the United Arab Emirates and Kuwait as the top countries, while Morocco and Egypt make up significant amounts, too. It’s down 11.8% in the last month.
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. 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.