Here is a factoid that illustrates just how bad things are for foreign exchange traded funds this year: With a year-to-date gain of 1.7% heading into Thursday’s session, the iShares MSCI New Zealand Capped ETF (NYSEArca: ENZL) was on the list of the 10 best foreign, non-leveraged ETFs.
That is not a knock on New Zealand or ENZL. The factoid does illustrate the decrepit state of affairs for a swath of emerging markets ETFs and the bitter disappointment investors have been subjected to with U.S. and Japan ETFs this year. [Investors Pull Billions from Emerging Markets ETFs]
Not all foreign ETFs have been duds this year. Problem is some of the real winners give investors reasons to pass these funds by, including fund size or lack thereof, and the region said ETFs offer exposure to. That region is the Middle East.
Despite the well -documented tale of woe for the iShares MSCI Turkey ETF (NYSEArca: TUR), once viewed as the best ETF for accessing equities anywhere in the Arab world, some Middle East ETFs have surged this year. [Rate Hikes Not Helping BIITS ETFs]
Alright, so it can be argued that Turkey is not a Middle East nation, but that does not change the fact that four of the top five foreign ETFs this year focus squarely on the Middle East. The best of the lot is the Market Vectors Egypt Index ETF (NYSEArca: EGPT), which is not only the best foreign ETF with a year-to-date gain of almost 11%, but also one of the 10 best non-leveraged ETFs of any stripe.
Egyptian stocks hit a three-year high Thursday following “a statement from the military authorising army chief Abdel-Fattah El-Sisi to run for president,” according to Ahram Online.
The good news does for Middle East ETFs does not end with EGPT. The WisdomTree Middle East Dividend Fund (NasdaqGS: GULF) is this year’s third-best foreign ETF. GULF has a 30-day SEC yield of 4.5%, though the real utility of this ETF lies in its country weights.
That includes a combined 58% weight to Qatar and the United Arab Emirates. Those countries will depart frontier markets ETFs benchmarked to MSCI indices in the second quarter to join the MSCI Emerging Markets Index, but that move will not affect GULF because it is a regional fund, not a dedicated emerging or frontier ETF. [Frontier Markets Still Beating Emerging Peers]
Despite some declines in recent days, the Market Vectors Gulf States Index ETF (NYSEArca: MES) is also positive on the year and ranks fifth among global ETFs. MES allocates 61% of its weight to Qatar and UAE and like GULF, the Market Vectors offering will not be affected by those countries moving to emerging markets status.
Highlighting just how well Middle East ETFs have performed this year, the PowerShares MENA Frontier Countries Portfolio (NasdaqGS: PMNA) has been bid higher and been on the receiving end of some praise. However, there is an important caveat with PMNA: The ETF’s last day of trading is Feb. 18. That announcement was made over a month ago.
Investors looking for developed market fare in the Middle East should note the iShares MSCI Israel Capped ETF (NYSEArca: EIS) and the Market Vectors Israel ETF (NYSEArca: ISRA) have both traded modestly higher this year.