The exchange traded fund tracking Egyptian stocks is neck and neck with the Greek ETF for the best-performing country ETF this year with a gain of nearly 40%.

Market Vectors Egypt ETF (NYSEArca: EGPT) is enjoying a solid rally in 2012 and recently climbed above its 200-day moving average.

“Local investors and a smattering of emerging market funds have snapped up shares in the country’s blue-chip companies. After a dreadful 2011, when Egypt’s revolution and economic and financial turmoil wiped out almost half the benchmark EGX30 index’s market capitalization, the index has risen nearly 40% this year,” the Financial Times reports.

The Egypt ETF is relatively small with about $50 million in assets.

“Everyone was so negative on what could happen on the anniversary of the revolution [in late January]but when it looked like not much would happen, we have had a relief rally,” Mohamed Ebeid, head of brokerage at EFG-Hermes, Egypt’s largest investment bank, told the FT.

Yet some think the rally in Egypt’s stock market is overdone.

“Egypt’s stock market is a paradox. Political tensions are getting worse, the economy is deteriorating and foreign exchange reserves are falling dangerously low. And yet equities are up nearly 40 per cent, the biggest gain in the world for 2012,” according to a separate FT report. “Clearly investors are betting that the closer the country edges to economic collapse, the greater the chances of the politicians seeing sense and the IMF leading an early bail-out. But what if they’re wrong?”

The Egyptian ETF listed in the U.S. was launched in February 2010.

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