The Market Vectors Egypt ETF (NYSEArca: EGPT), already a pleasant 2014 surprise among single-country emerging markets exchange traded funds, could see another positive catalyst come to fruition: A significant dividend increase from its largest holding.
Orascom Telecom Media & Technology SAE climbed to an 18-month high on speculation the company could boost its dividend by 32% of yesterday’s closing price, Bloomberg reported.
The stock is 7.54% of EGPT’s weight. The lone Egypt ETF has a 16.4% weight to the telecom sector, the fund’s second-largest sector allocation behind financial services at 41.6%. A more stable political environment in Egypt, North Africa’s largest economy, is bolstering stocks and stoking hopes for increased economic growth. [Seven Global ETFs With Surprisingly High Yields]
A related, near-term catalyst for the broader EGX30 Index is the referendum on a new constitution, which is widely expected to pass. Additionally, Egypt’s central bank is following a loose monetary policy, cutting benchmark rates in three of the last four Monetary Policy Committee meetings. The government is shooting for 3.5% economic growth in the year ending June 2014. [Government Boosts Egypt ETF]
The constitutional referendum, favorable monetary policy and increased dividends have the potential to lure foreign investors, a market in dire need of additional capital. Egypt was able to sell almost $1.1 billion in one-year government bonds earlier this week at a lower yield than at the previous auction, a positive sign.