By Steve Orlowski
It comes as no surprise that performance results year-to-date from the Middle East and North Africa are mixed. While countries within the two regions are either involved in or affected by military and political conflicts, terrorist activities and volatile oil and natural resource markets there is room for optimism.
PMNA, the PowerShares MENA Frontier Countries ETF (PMNA) is essentially flat year to date reflecting the variation of returns in these regions. PMNA tracks the MASDAQ Middle East North Africa Index (MENA) and is invested in the following countries: 1. Kuwait 22.73% 2. United Arab Emr 19.72% 3. Qatar 19.63% 4. Egypt 17.33% 5. Morocco 8.59% 6. Bahrain 7.87% 7. Oman 4.13%.
The ETF is in a consolidation mode. This type of formation typically presedes a breakout as the range between high and low prices narrows. Based upon this chart the ETF is in a range between approximately $10.40 and $10.90. Which direction it breaks out will be determined by its component countries.
Egypt was a big positive story investment-wise earlier this year as its stock market rallied. That performance is demonstrated here by the Market Vectors Egypt Index ETF (EGPT) which rallied from about $9.50 per share at the beginning of the year to approximately $16.00 per share in September. It has since lost more than 25% of it value from the peak, trading close to $12.50 currently.
The Market Vectors Gulf States Index ETF (MES) tracks the Dow Jones GCC Titans 40 Index. It’s country exposure is as follows: 1. Kuwait 38.9% 2. Qatar 31.3% 3. UAE 22.4% 4. Oman 3.0% 5. Bahrain 2.7% 7. Norway 2.0% 8. Others -0.2%. It is notable that nearly 93% of the portfolio is invested in Kuwait, Qatar and the United Arab Emirates.
Unlike EGPT this ETF regained what it had lost earlier in the year beginning in late summer and moving into September, rallying from near $19.00 per share to over $21.00 per share. However the ETF is trading near the top of its 2012 range and a convincing breach of the top of the range will be necessary to dispel concerns of a retracement to prior lows.
Finally and possibly most optimistically is the Market Vectors Africa Index ETF (AFK). This is an interesting ETF but not a pure-play on North Africa. It is however a decent proxy for the continent and not a bad way to get some exposure there.
25.6% of the portfolio is invested in South Africa. This is important to note as many now refer to the BRIC countries as the BRICS countries, the capital “S” standing for South Africa. The ETF also has 19.1% in Egypt. If an investor already owned EGPT that investor may need to take a look at the individual holding in AFK.
The ETF has done well. Despite a sell-off in November from a little more than $32.00 per share to about $30.00 per share the ETF is still up approximately 20% for the year.
I am seeing much more analytical coverage of North Africa in the investment media, the perspective of which is increasingly positive. The region is a necessary component for effective emerging market investing. It is expected that more and more specific ETFs will be launched in response to the growing demand for access to North African investment opportunities.