Greenberg: Why Investors Should Skip the Middle East
When it comes to Egypt and the Middle East, investing opportunities are slim to next-to-nil – even with ETFS.
Sure, there are a handful of ETFs with exposure to Egypt and Mideast, but their trading volume is ridiculously thin with little in the way of assets under management.
And in the world of investing, thin equals dangerous because stocks can rise and fall in big swings on little volume.
“The region is an economic powerhouse, but not a lot of the wealth trades hands on well-regulated, investable exchanges,” says Dave Nadig, research chief of IndexUniverse.
The purest play is the Market Vectors Egypt fund. But it has only $11 million in assets under management and until popping Friday to 1 million shares it traded an average of less than 100,000 shares a day. (By contrast, the iShares MSCI South Korea Index has $3.8 billion in assets.) The Egypt ETF is now halted, which makes sense – so is the Egyptian Stock Exchange.
Others Middle Eastern-centric ETFs include:
• The PowerShares MENA Frontier Countries Portfolio , with 21% of its portfolio in Egypt.
• SPDR S&P Emerging Middle East & Africa Fund : 5.8%.
• WisdomTree Middle East Dividend Fund : 10.95%.
All are equally thin with little in the way of assets.
Guggenheim Frontier Markets, with nearly 13% of its portfolio in Egypt, is broader – but it’s more of a proxy on emerging markets.
The region is so much in the investment backwaters that it barely shows up even in the biggest of all emerging market ETFs – the iShares MSCI Emerging Markets Index, which has $46 billion in assets. “The big emerging market indexes really don’t touch the middle east,” Nadig says, “it’s all too small.”
Noticeably absent from all Middle East funds: Any investment in Saudi Arabia. Its stock market is still closed to foreigners. If it ever does open, “It will be a big, interesting story,” Nadig says.
Indeed it will. But like the rest of the Mideast, its float is locked down by private investors, which means it will likely be just as thin (and volatile) as the rest.
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