Middle East ETF Update

 |  Includes: EIS, GAF, GULF, ICL, MES
by: Nuqudy

According to ETF Database, the four ETFs traded in the United States that cover the Middle East and North Africa, which were discussed in our November 2011 article, remain the only ones. Additionally, they continue to be largely unrepresentative of the region.

The primary difference since November is that the total asset value has dropped for all four ETFs. The largest is still GAF, the SPDR S&P Emerging Middle East & Africa with assets of $96 million, down from $105 million; followed by the iShares MSCI Israel Capped Index Fund (NYSEARCA:EIS) with $ 79 million, down from $83 million; WisdomTree Middle East Dividend Fund (NASDAQ:GULF) with $13.6 million down from $18 million, and Market Vectors - Gulf States (NYSEARCA:MES) with $11.4 million, also down from $18 million.

Despite turmoil, all four funds are up year-to-date, a positive result considering last year's abysmal numbers (see table below). But this could be because half of the funds are invested very little, if at all in the Arab stockmarkets of the Middle East. GAF's asset allocation continues to be dubiously connected to the Middle East - there is no investment in Middle East countries, and minimal investment in North Africa. The vast majority (89%) of its holdings come from South Africa, with 5.1% and 3.7% coming from Egypt and Morocco, respectively. This calls into question the fund's MENA title, despite its 8.14% increase year-to-date.

On the other hand, EIS remains majority invested in the Middle East, with 99.68% invested in Israel. The ETF has no investment at all in Arab countries, and continues to have its largest holdings in Israeli blue-chip companies such as Teva Pharmaceuticals (NASDAQ:TEVA) at 23% of the fund and Israel Chemicals (ISCHF.PK) at 9.9%. EIS had a bad year last year, falling over 30% between January and December 2011. Regardless, it only lost about $4 million overall and is up this year. This can be compared with the Tel Aviv Stock Exchange (TA-25 Index), which is only up 0.03% year-to-date 2012.

MES is the first fund listed that actually maintains holdings in Arab Middle East companies, with 97.66% of holdings in the Middle East. It primarily invests in relatively stable Gulf countries with the top percentages of holdings going to publicly traded companies in Kuwait (35.71%), Qatar (29.82%), and the United Arab Emirates (23.64%). Saudi Arabia, the strongest oil country, is still not represented.

The last fund listed, GULF, also primarily invests in Middle East countries, with 89.45% allocated there and 10.4% to Africa. The top countries are the same as in MES: Qatar (36.12%), Kuwait (26.18%), and the United Arab Emirates (19.78%). Morocco represents the entire 10.4% invested in Africa. It is up 2.94% year-to-date, compared to last year's performance of falling 4.11%.

The year-to-date performances of the indices are largely reflective of their regions. The Dubai Financial Market is up 9.96%, the Abu Dhabi Security Exchange is up 2.97%, the Kuwait Stock Exchange is up 10.88%, and the Qatar Exchange is down 2.63%. The poor performances in 2011 are also reflected in the indices of the region, as Dubai was down 17%, Abu Dhabi fell 11.68%, Kuwait fell 16.41%, and Qatar rose 1.12%.

While the ETFs remain largely undiversified, it is understandable given the current volatile economic situation throughout the Middle East. The funds are all up year-to-date, probably due to the primary investments being in financially stable countries. However, for someone looking to invest in the Middle East's emerging economies, these ETFs do not provide.


Annual Dividend Yield

Expense Ratio

Performance 2012 YTD

Performance 2011**

Top 10 Holdings (as % of total)

Number of Stock Holdings

Total Assets ($mm)

































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*All data from etfdb.com as of May 11, 2012

**Data from Google Finance

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.