Government in Flux Could Impact Egypt ETFs

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Includes: AFL, EGPT, FRN, PMNA
by: Tom Lydon

The current president of Egypt is visibly ailing, and with no obvious successor, the Parliamentary elections set for November and presidential election next September may lead to a shift in the country’s politics, economy and ETFs with heavy exposure to the nation.

Egypt maintains an old centralized administration that has failed to deliver proper social programs and a corrupted law system, according to The Economist. Most concerning are the lack of fitting schools and hospitals. The large pool of poor and destitute still line up for government-subsidized bread and live in extreme poverty.

Nevertheless, the government in place has come far from its old militaristic dictatorship of decades past. The country now nurtures private business and allows for more pluralism.

The coming elections may provide one of three outcomes:

  • A new president who rules by an iron fist may emerge.
  • The whole system may dissolve under a violent overthrow.
  • The country may evolve and provide for a much-needed change for its citizens.

Finance Minister Youssef Boutros Ghali stated that Egypt’s budget deficit will likely decline further this fiscal year, as stated by The Associated Press. The fiscal deficit ending last month was 8.3%. Additional savings on wages and cutbacks, including subsidies, will lower the deficit.

Egypt’s economy is expected to expand a little over 5% this year. Tourism, revenue from the Suez Canal and worker remittances are all expected to increase as the global economy recovers.

  • Market Vectors Egypt Index (NYSEARCA:EGPT)
  • Market Vectors Africa ETF (NYSEARCA:AFK): Egypt is 19.1%
  • PowerShares MENA Frontier Countries Portfolio (NASDAQ:PMNA): Egypt is 18.8%
  • Claymore/BNY Mellon Frontier Markets (NYSEARCA:FRN): Egypt is 14.6%

Max Chen contributed to this article.

Disclosure: None

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