It should not be news to anyone that the Middle East and Africa have their share of conflicts occurring at the moment, which at the very least has contributed to some level of volatility and weakness in some cases depending on the specific local market (i.e. EIS (iShares MSCI Israel, Expense Ratio 0.62%) has traded sideways now for the past three months after a decent start to 2014 for example as has NGE (Global X Nigeria, Expense Ratio 0.68%) .
One market that has emerged unscathed, which surely is directly correlated with their geography as well as an increase in the level of stability locally over the past several years is that of Egypt.
EGPT (Market Vectors Egypt, Expense Ratio 0.98%) has become awfully popular lately in the ETF trading world, with several larger spikes in volume in the past two weeks amid the local stock market’s steady path up. The fund has picked up another $15 million in new assets in the past couple sessions, making year to date inflows about $25 million.
These are modest numbers in terms of notional assets, as trading volume in the fund (about 22,000 shares traded daily) and overall asset levels ($83 million), are not large given the fund has been around since 2010.
Working in its favor is that EGPT is currently the only U.S. listed ETP that focuses on the country, so it has that clear and desirable first mover advantage. EGPT holds thirty individual equities, and there is notable concentration in small and mid-cap names, (>95% of the portfolio resides there).
Top holdings in the fund are not recognizable, household names to most but far from it: Commercial International Bank SAE GDR (>9.7%), Global Telecom Holding SAE (>7.3%), Talaat Moustafa Group Holdings (>7.3%), Telecom Egypt (>5.6%), Egyptian Financial Group-Hermes (>5.6%).
Year to date EGPT is up nearly 43% but net down since inception in February of 2010 interestingly. One concern that should be top of mind for Egypt investors but by the looks of things perhaps it is not is what if Egypt’s hand is forced to become part of a broader coalition as President Obama says in terms of warding off the progress and proliferation of groups like ISIS.
For now Egypt has not been a major player in the Iraq/Syria/U.S. headlines, but it is worth watching in the near term especially in the face of recent break-out performance in the country’s equity market. Any instability that would potentially spillover from say neighboring Libya, or if there is a significant international incident against the current ISIS backdrop would likely not be received well in most markets in the broader region and may encourage profit taking if not outright shorts entering the market.
Market Vectors Egypt Index ETF
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