The U.S. celebrated its independence on Thursday.
Hopefully, Egypt is on a similar path. The North African
nation broke free of Mohammed Morsi's "leadership" earlier this
week in an effort to sever ties with the controversial Muslim
Brotherhood. Morsi is under house arrest and Adly Mansour has
been sworn in as interim president following what some
international observers are deeming a military coup.
The overthrow of Morsi represents Egypt's second regime change
since the Arab Spring over years ago and to say North Africa's
largest economy is fractured and home to a still tenuous
political situation is an understatement. However, financial
markets have embraced that idea that Morsi has been removed from
power because the Market Vectors Egypt ETF (NYSE:
) has been surging this week.
EGPT, which had previously reached lows that worse than those
seen during the Arab Spring, was reverse split
on a 1-for-4 basis on Monday
, so the ETF got the benefit of some artificial price inflation.
What has happened since then, however, has been legitimate price
appreciation as traders have bet the ETF would benefit from
News of Morsi's potential then realized ouster has been a boon
for EGPT, sending the ETF higher
on impressive volume
. The lone Egypt-specific ETF shot up on Tuesday on roughly six
times the average turnover. EGPT even managed to trade quadruple
its daily average in Wednesday's holiday shortened session. With
more than three hours left in Friday's session, EGPT is up four
percent on volume that is already more than six times the
EGPT's post-reverse split price was just over $38. The fund is
flirting with $44 Friday, but that does not mean this is suddenly
a docile fund that all investors should embrace. Investors
looking to participate in upside for Egyptian stocks without
making in an all-in bet on the country can consider a pair of
Market Vectors Africa Index ETF (NYSE:
) The Market Vectors Africa Index ETF is another "not for the
faint of heart" play and that is not just because of the fund's
22.6 percent weight to Egypt. South Africa, also ravaged by
stunningly high unemployment, accounts for 24.3 percent of AFK's
weight. AFK's South Africa exposure means investors that buy this
fund are, to some extent, leveraged to gold, platinum and
palladium prices, tough corners of the market to be in at the
The good news is AFK does offer a 20.2 percent allocation to
Nigeria, another frontier market awash in
investment potential and peril
. AFK has been getting a boost from Egypt as the ETF is up 3.4
percent in the past week.
Investors should know what they are getting into at the sector
level as financials, energy and materials names combine for
nearly three-quarters of AFK's weight.
PowerShares MENA Frontier Countries Portfolio (NASDAQ:
) The PowerShares MENA Frontier Countries Portfolio stands as one
of the more compelling ETF options for Egypt exposure for a
simple reason: Attractive country allocations. Egypt accounts for
nearly 18 percent of PMNA's weight, but that is easily trumped by
the 24.1 percent weight controlled by far steadier Kuwait.
More importantly, United Arab Emirates and Qatar combine for
31 percent of the ETF's weight. Stocks in those countries have
been among the world's best performers this year. Economic
advancement and political stability in both nations has finally
as both recently gained promotions to emerging
UAE and Qatar's new emerging markets status is expected to
mean hundreds of millions, if not billions of dollars in new
foreign investment into these countries
Until recently, Egypt has been a drag on PMNA, but if the
country can establish true political stability, the ETF becomes
all the more attractive. Still, PMNA is a legitimate play on the
UAE and Qatar growth stories
, which are just getting going.
For more on ETFs, click .
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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