Egypt ETF Tanks 8% After Violent Anti-Morsi Protests

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Egypt's stock market and ETF crashed Monday following days of violent protests across the country against President Mohammed Morsi's move to give himself sweeping new powers.

In afternoon trade,Market Vectors Egypt Index ETF ( EGPT ) -- the only ETF tracking that country solely -- gapped down 8.09% to 12.95, a four-month low. It was the ETF's largest one-day plunge in more than a year.

EGPT broke below the key 200-day moving average for the first time in five months, a very bearish development. Trading tends to become more volatile when a stock or ETF breaks below the 200-day line. The biggest intraday swings and upside and downside moves often occur under that line.

EGPT's fortunes appear to have turned.It had been one of the top-returning ETFs of the year, rallying 48.94% year to date through Nov. 23. By contrast,iShares MSCI Emerging Markets Index ( EEM ) returned 11.09% over the same period, according to Morningstar.IShares MSCI EAFE Index ( EFA ), which tracks developed foreign markets, rose 12.75%.

"How this power grab plays out will determine whether the Egyptian market rebounds to be the top global performer this year or in the top five," Wojtek Zarzycki wrote in an email. He is the chief investment officer of Optimal Investing in Toronto and New York, with $150 million in assets under management.

"The sell-off is showing some oversold conditions so today's snapback (from its intraday low) could be the start of a small rally," Zarzycki wrote. "However, we need a few days of positive returns to confirm."

S&P Capital IQ rated the country negatively in a report released Aug. 31.

"The negative outlook reflects our view that we could lower the ratings if political or social tensions were to escalate again," said Trevor Cullinan, a Dubai-based analyst for S&P Capital IQ. "Moreover, the willingness of international donors/lenders to extend much-needed support could weaken if the Egyptian authorities are unable to effectively address ongoing economic, fiscal, and external challenges.

"Conversely, if Egypt's political transition strengthens the social contract and if external pressures ease - an indication of which would be an increase in net international reserves - we could revise the outlook to stable."

PowerShares MENA Frontier Countries Portfolio ( PMNA ), with a 20% weighting in Egyptian stocks, tumbled 3.01% to 10.54. It also broke below the key 200-day line . PMNA invests in Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar, United Arab Emirates, Dubai and Abu Dhabi.

Jonathan Citrin, founder and CEO of CitrinGroup, a Birmingham, Mich., firm with $60 million in assets under management, advises investors to steer clear of investing in Egypt and the Middle East. He expects those markets to be very volatile because of all the conflicts in the region, including those in Israel, Gaza and Syria. There's no telling what impact the upheavals will have on businesses and foreign investments yet.

Follow Trang Ho on Twitter @TrangHoETFs .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: EEM , EFA , EGPT , PMNA

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