Egypt ETF in Focus
With Egypt on the verge of recovery, it appears that investors are becoming optimistic on the country. In fact, the ETF tracking the region – Market Vectors Egypt Index ETF (NYSEARCA:EGPT) – is clearly outpacing the broad emerging market funds by wide margins, gaining nearly 9% in the year-to-date period.
The fund tracks the Market Vectors Egypt Index, which comprises companies that are domiciled in Egypt or generate at least 50% of their revenues in the country. The fund holds 27 securities in its basket and amassed $51.2 million in its assets base. Expense ratio came in at 0.96%.
In terms of holdings, more than two-fifths of the total assets are invested in the financial sector, with about 8% weight assigned to the top holding – Commercial International Bank Egypt.
Outlook Still Cloudy
Despite several measures to boost economic growth, high debt levels, devaluation of the Egyptian pound and rising unemployment pose major risks to the economy (read: Is the Worst Ahead for the Egypt ETF?).
The budget deficit increased to $10.8 billion in the first four months of the current fiscal year 2013–14 (July–October) as compared to $10.1 billion in the year-ago period. It is expected to rise to $27 billion for full fiscal year 2013–14 but would likely remain below $34.8 billion reported in fiscal year 2012–13.
To sum up, although the Egyptian economy is showing some signs of stability, it still has a long way to go. Investors should note that more trouble could be in store for this nation ahead of the election and referendum on Egypt’s revised constitution.
We currently have a Zacks ETF Rank of 5 or ‘Strong Sell’ rating on EGPT. This suggests that the longer-term picture is still very weak for this fund, and that investors should not be fooled by this recent surge. Further, high level of volatility associated with this ETF makes it unsuitable for many investors.
This article is brought to you courtesy of Eric Dutram.