Last year, it was the Arab Spring that roiled the politically
volatile Middle East. This is year, the seasonal phrase has turned
to Arab Winter as anti-Western protests have spread across the
region. Last week, U.S. Ambassador to Libya Chris Stevens was
killed and his consulate burned during protests in Benghazi.
The CIA believes the calamity in Benghazi was sparked by
protests in Cairo
. Backlash against the film "Innocence of Muslims" has led to
tumult throughout the Arab world and prompted the U.S. State
Department to evacuate non-esssential personnel from embassies in
Sudan and Tunisia last weekend.
However, even as the anti-U.S. protests have escalated and
spread to Southeast Asia, a curious phenomenon has emerged. That
being the resilience of ETFs with heavy exposure to the Middle
East. On Monday, a day that when any heat map showed a sea of red
for emerging markets funds, Middle East ETFs were not just holding
up; they were going up.
Take the example of the Market Vectors Egypt Index ETF (NYSE:
), the lone ETF exclusively devoted to the North African nation.
Discarded like yesterday's newspaper following the Arab Spring and
the overthrow of the Mubarak regime, EGPT has come roaring back to
be one of this year's best-performing country-specific ETFs.
Moreover, the ETF is showing a penchant for performing well in
the face of adversity. EGPT
rose on strong volume last Tuesday
when the Cairo protests turned vicious. On Monday, the ETF added
another 1.9 percent on volume that was nearly triple the daily
Not only is EGPT's share price rising, but so is its assets
under management tally. The ETF had $51.6 million in AUM as of the
end of August, $54.8 million as of the close of markets on
September 10 and $60.6 million a week later. EGPT will not be
confused with the Vanguard MSCI Emerging Markets ETF (NYSE:
), but the asset gains on a percentage basis and in the face of
political uncertainty are undoubtedly impressive.
The WisdomTree Middle East Dividend Fund (NASDAQ:
) is another fund that is proving sturdy despite regional calamity.
Interestingly the ETF did not trade on Monday, but in the previous
five trading days, GULF tacked on two percent. Over the past month,
the ETF gained 4.3 percent.
GULF, which has a 30-day SEC-yield of 4.7 percent, is heavily
allocated to less volatile Middle East locales. United Arab
Emirates, Qatar and Kuwait combine for 75 percent of the fund's
weight. Still, this is an ETF with "Middle East" in its name that
devotes 22 percent of its combined weight to Egypt, Morocco and
Oman. Volume in GULF may not be jaw-dropping, but the ETF is
fighting off the guilt by association issue that often afflicts the
Middle East when just a few of its nations are generating negative
Speaking of low volume, that is what the PowerShares MENA
Frontier Countries Portfolio (NASDAQ:
) is afflicted with, but the ETF did trade on Monday and gained 0.7
percent in the process. Over the past five days, PMNA has climbed
PMNA, itself a decent yielder with a 30-day SEC yield of nearly
3.6 percent, devotes over 22 percent of its weight to Egypt.
Usually, that would not be a good thing in an environment of
elevated political drama. Recently, that has not been the case as
PMNA has quietly gained 3.5 percent in the past month.
The Market Vectors Africa ETF (NYSE:
), which is a diverse play on that continent, has performed nicely,
indicating that it is not being hampered by a combined 31 percent
allocation to Egypt and Morocco. AFK is likely being buoyed by a 24
percent weight to South Africa and a 15.3 allocation to Great
Britain. AFK traded lower on Monday, but the fund is still up
almost three percent in the past week.
Perhaps the most impressive performance of all Middle
East-related ETFs is the iShares MSCI Israel Capped Investable
Market Index Fund (NYSE:
). Israel, long the most dependable U.S. ally in the region, is
what one might call a "guilt by geography" play. Israel is home to
an advanced, developed economy, but the corner of the globe it
occupies makes its equity market vulnerable to political discontent
in the region.
EIS at best has been a mediocre performer in 2012, but the ETF
is showing signs of turning things around. Up 4.5 percent in the
past month and 3.3 percent in the past week, the next big hurdle
for EIS is reclaiming its 200-day moving average. That is about
$1-off based on Monday's close.
EIS, which is home to just $71.8 million in AUM ($10 million
below AFK), has been vulnerable to Middle East volatility in the
past. There are no guarantees the current sturdiness will continue,
but as the ETF tracking the area's steadiest nation, EIS does merit
For more on Middle East ETFs, click
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