Invest In the Middle East With This ETF [Market Vectors Gulf States(ETF)(NYSEARCA:MES)]

About the Zacks ETF Rank

A look at top ranked Africa-Middle East Equity ETFs can be done by using the Zacks ETF Rank. This technique provides a recommendation for the ETF in the context of our outlook of the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors as well.

The aim of our model is to select the best ETFs within each risk category. We assign each ETF one of the five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other ETFs with a similar level of risk.

Using this strategy, we have found one ETF Ranked 2 or ‘Buy’ in the Africa-Middle East Equity ETF space– Market Vectors Gulf States Index ETF (NYSEARCA:MES) – which we have highlighted in greater detail below (See all the Middle East-Africa ETFs here).

MES in Focus

This often overlooked fund has a small asset base of $17.1 million. The fund uses a replication strategy to track the performance of its index, Market Vectors GDP GCC Index. The index tracks the performance of the biggest and most liquid companies in the Gulf Cooperation Council (GCC) region.

Financials dominate MES, alone forming more than 60% of the total fund assets. This is followed by Industrials (18.3%) and Telecomm (13%).

The fund is quite concentrated among its top ten holdings, which together constitute around 49.4% of the total fund assets. Emaar Properties Pjsc (7.52%), National Bank of Kuwait (5.65%) and Abu Dhabi Commercial Bank Pjsc (5.03%) are the top three holdings of the fund.

Country-wise, the fund invests heavily in UAE stocks (36.9%), followed by Qatar (24.3%) and Kuwait (21.9%). South Korea (2.9%) and U.S. (2.7%) have the least exposure in the fund.

The fund charges 99 basis points to investors as fees and has a dividend yield of 1.92%. The product returned 29% in 2013 and is up 3.38% since the start of the year.

Bottom Line 

The concentration risk related to both sector and country allocation is actually expected to work in favor of the fund.  UAE’s Finance sector is expected to be the major beneficiary of the World Expo 2020 bid win.

The win is expected to create tremendous job opportunities in the nation. Investment in infrastructure is expected to rise and other sectors including retail, trade, aviation and tourism are also expected to flourish.
Therefore, for investors keen on riding the Middle East boom, MES is surely an attractive option, and especially so when compared to the many struggling emerging market ETFs out there.

This article is brought to you courtesy of Eric Dutram.

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