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There is new blood in the ETF universe, and its not commodities or leveraged funds; it is the blood of the new frontier of investing, known as the frontier markets. On Thursday June 12, Claymore launched its Frontier Markets ETF (FRN), which will attempt to track the Bank of New York Mellon New Frontier DR Index [BKNFR]. Here is a brief snippet from Claymore on what comprises the index:

The Frontier Index tracks the performance of depositary receipts in American depositary receipts ("ADR") or global depositary receipts ("GDR") form that trade on the London Stock Exchange ("LSE"), New York Stock Exchange ("NYSE"), American Stock Exchange ("AMEX") and Nasdaq Stock Market ("NASDAQ") of companies from countries that are part of the Frontier Market, as defined by the Index Provider.

The Index Provider currently defines the Frontier Market countries as: Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates, Egypt, Ghana, Kenya, Malawi, Mauritius, Morocco, Nigeria, Tunisia, Zimbabwe, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Ukraine, Bangladesh, Pakistan, Papua New Guinea, Sri Lanka, Vietnam, Peru, Chile, Colombia, Ecuador, Jamaica, Panama and Trinidad & Tobago.

As of May 23, 2008, the Index's constituent countries were represented (in approximate market capitalization) in the Index as follows: Poland 25.0%, Chile 21.0%, Egypt 17.1%, Kazakhstan 7.8%, Peru 5.3%, Czech Republic 5.2%, Nigeria 3.4%, Lebanon 3.2%, Pakistan 3.0%, Oman 2.4%, Columbia 2.3%, Croatia 1.8%, Bahrain 1.4%, Georgia 0.7% and United Arab Emirates 0.5%.

Currently FRN's total market cap is just shy of $4,000,000 and has an expense cap of 0.65%. The top ten holdings are names you probably have never heard of, and are as follows:

  • BANK PEKAO SA 7.94 %
  • TELEKOMUNIKACJA POLSKA 6.52 %
  • ORASCOM TELECOM HOLDING S 6.11 %
  • KAZMUNAIGAS 5.23 %
  • MINAS BUENAVENTURA ADR REP 2 SER'B'PEN1 5.20 %
  • ORASCOM CONSTRUCTION INDU 5.03 %
  • POLSKI KONCERN NAFTOWY OR 5.03 %
  • KGHM POLSKA MIEDZ SA 5.03 %
  • EMPRESA NAC ELEC-CHIL ADR 4.88 %
  • ENERSIS-ADR 4.21 %

PowerShares recently announced that it would be launching its own frontier market ETF with the planned ticker of PMNA. The fund will be based on the NASDAQ OMX Middle East North Africa Index, which is comprised of the largest and most liquid securities in Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and the UAE.

Disclosure: None

Source: The New Frontier Markets ETF: Can You Handle It?