After many delays, the Egyptian Stock Exchange reopened yesterday. A 10% drop within minutes of the opening triggered circuit breakers and suspended trading for the day.
During the nearly two-month closure, many investors mistakenly assumed the Market Vectors Egypt ETF (NYSEARCA:EGPT) was a good proxy for the Egyptian stock market. I pointed out what I saw as the fallacy of that view in my Impending Collapse of the 30% Premium for EGPT article.
Instead of jumping 30%, the NAV for EGPT dropped 7.3% overnight to $15.31, as Van Eck deployed the 41% cash stake that had built up while Egypt was closed. Trading in EGPT closed at $16.65 yesterday and was halted before the market opened this morning. Trading commenced one hour later, with the price dropping to $15.26 – the premium totally collapsed and a slight discount was momentarily available.
EGPT traded for $19.21 just 10 market days ago – a +25.5% premium to today’s NAV. Much of the price collapse occurred yesterday as traders learned of the reopening of markets in Egypt.
According to a BBC article, the reopening of Egypt’s market was forced by MSCI (Morgan Stanley Capital International) indexing rules which would have eliminated all Egyptian companies from various MSCI indexes due to lack of trading.
Van Eck’s EGPT website provides the latest information on the fund’s holdings and cash levels. Van Eck has not stated when they will resume share creation and redemption for the fund. My article EGPT Now 50% Cash With A Hefty Premium For That Cash warned investors of these events and the potential implications.
Disclosure: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.