The Week Ahead And Why Egypt Matters (EGPT, TUR, FXI, RSX)
What is happening in Egypt matters a great deal to global investors. It may be a relatively small market, but events like what we are watching punctuate the shifts in risk and capital flows that have been building up.
Egypt matters very much to the rest of the Middle East and has been seen as the one rock in a regional tinderbox of political, religious and social fuses. But if Cairo is the key to the Middle East, it is key to us — the entire Arab world is watching.
From an emerging markets perspective, Egypt won its place in the “CIVETS” group — Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa — because it offers real demographic excitement: 80 million highly educated people, along with some of the best companies in the region.
Western investors are already in Cairo. I do not see them pulling out, but if there is a change in power as we have been expecting for awhile, the question is whether the new government will respect the Egypt-Israeli peace pact that has been the foundation of U.S. policy in this region for years.
Meanwhile, the issues that are emerging in Egypt — inflation, political instability and above all risk — are more or less a factor in other emerging markets.
Whether a regime is new (Brazil, where Dilma just took power a month ago) or old (China), politics are central to understanding how a given country will evolve. Will it be friendly to business, or will it engage in social experiments that spook global corporations and stagnate economic activity?
Next week: a ton of key data, with Chinese PMI at the fore. Chinese New Year is always an interesting place to hike interest rates. And in Turkey and Russia, reviews have been mixed. Russia looks vulnerable to profit-taking, whereas Turkey’s already been there. We like Turkish banks but a few too many knives are still falling. I am going back there soon and will report back on conditions on the ground.
ETFs to focus on: iShares FTSE China 25 Index Fund (NYSE:FXI) for the China PMI, Market Vectors Russia ETF (NYSE:RSX) versus iShares MSCI Turkey Invest Mkt Index ETF (NYSE:TUR) and of course the Market Vectors Egypt Index ETF (NYSE:EGPT).
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.