With a year-to-date gain of 51.3 percent, the Market Vectors
Egypt ETF (NYSE:
) is one of the best-performing non-leveraged
of any stripe. For most of this year, the lone ETF exclusively
devoted to the North African nation has been surprisingly
resilient in the face of regional turmoil.
EGPT has been so solid that the ETF actually rallied on
September 11, the day
protesters stormed the U.S. embassy in Cairo
. The fund's resilience is being put to the test tensions
escalate in Egypt over Israel's latest offensive against the
militant group Hamas in the Gaza Strip.
Amid concerns the Egyptian government is erroneously legal
action against some of
the country's biggest companies and EGPT's
, the fund has tumbled 7.1 percent in the past month. EGPT has
dropped 1.3 percent in the past week as Egyptians have criticized
President Mohamed Mursi for not taking a harder line against
Israel for the Gaza attacks.
Egypt and Israel share a fragile peace accord, but this latest
spate of regional strife could be a near-term blow EGPT's
fortunes. The ETF's run higher, which took the fund from just
over $10 in July to nearly $16 in early October, seemed to defy
convention as outsiders remained pensive about the Egyptian
economy. With good reason, unemployment is well into the
double-digits, but joblessness among the nations young people is
even higher at nearly 25 percent.
Further adverse interference by the Morsi administration could
impact foreign direct investment and plague Egypt's
domestically-focused economy, one that is already suffering from
dwindling foreign reserves and a rising fiscal deficit.
Over the weekend, Egyptian equities endured their worst
performance in four months. Commercial International Bank Egypt,
the country's biggest lender, slid to its lowest levels in two
That is significant for two reasons. First, the stock is
EGPT's largest holding with a weight of almost 9.5 percent.
Second, the fund devotes 44.5 percent of its weight to financial
There is speculation Israel and Hamas could reach a ceasefire
in the coming days, which could lead to quick pop in EGPT and
other ETFs with exposure to the region such as the PowerShares
MENA Frontier Countries Portfolio (NASDAQ:
EGPT needs it. The ETF's recent slide has taken the fund below
its 50-day moving average and a look at the chart shows EGPT
could fall another eight percent to 10 percent before finding
Interestingly, EGPT has been sending signals that all is not
well. Two months ago, the ETF had over $61 million in assets
under management, but the fund will start trading today with
. That may not sound like a large amount of inflows, but it is
significant on a percentage basis for an ETF of EGPT's still
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