Van Eck's New Gulf States Index ETF

The new Market Vectors Gulf States Index ETF (MES) launched on July 23rd, the most recent region specific ETF to hit the market. The Gulf States fund is based on the Dow Jones GCC Titans 40 Index, which is comprised of public companies that are headquartered in countries that belong to the Gulf Cooperation Council [GCC] or that generate most of their revenues from countries belonging to the council. In addition to being part of the GCC, companies in the index must have market caps greater than $100 million, a 3-month average daily turnover of $1 million, and trade on recognized stock exchanges. MES is country heavy in Kuwait (52%), the United Arab Emirates (26%), Qatar (15%), and Oman (4%).

The Gulf States Index ETF is the most recent of a slew of Middle East, Africa, and frontier market ETFs to become available. PowerShares recently launched a similar, but more diverse MENA Frontier Countries Portfolio ETF (PMNA) which also has top country exposure in Kuwait, and exposure in Qatar, the United Arab Emirates, and Oman. Other similar ETFs include State Street's Emerging Middle East and Africa Fund (GAF), Market Vectors Africa Index Fund (AFK), and Claymore's Frontier Markets ETF (FRN).

The top 10 holdings in the Gulf States Index ETF are:

• Mobile Telecommunications Co. - 12.14%
• Kuwait Finance House - 10.45%
• National Bank of Kuwait - 7.92%
• Emaar Properties - 7.21%
• National Industries Group - 5.43%
• Qatar National Bank - 3.28%
• Public Warehousing Co. - 2.87%
• Global Investment House - 2.83%
• First Gulf Bank - 2.65%
• Commercial Bank of Kuwait - 2.63%

The fund has a heavy weighting in banks (38%), followed financial services (22%), and real estate (11%). The expense ratio for the fund is 0.98%, and trades on the NYSE Arca exchange.

Disclosure: none

Comments

[topax:]

my job as a reporter has enabled me to watch the gcc markets for more than a decade. they are run like casinos not stock markets, and although companies' stock prices have gone up, corruption is paramount. high net worth individuals, esp in kuwait, control the markets with large-block ownership-- my advice -- stay out of these waters which might look enticing, they are full of sharks. these markets have little to none regulation. they are mere speculation vehicles. if you insist to enter this market, i advise to learn arabic and do thorough checks of the companies and their ownership (not always transparent -- beware.

2008 Jul 25 09:14 AM

[topax:]

forgive the typo -- gcc markets "little to no regulation," thanks

2008 Jul 25 09:15 AM

[fxtrader07:]

thanks topax for the advice. it actually was the author's job. but anyway, thanks also to him for putting topgether some facts on the GULF etf

2008 Jul 25 09:18 AM

[Thomas Smic...:]

Good article. I agree with topax. Corrruption in that region is a way of life. If you are an infidel, assume the worst.

2008 Jul 25 10:50 AM

[David Hunkar:]

Besides what topax point out, most of the "companies" that are publicly listed in these countries are nothing more than pet projects for the sheiks and their family friends like sons,daughters, cousins,etc. Nobody knows the real finances of these companies except the insiders.So beware before jumping into those parts of the world.

2008 Jul 26 12:12 PM