Top 3 Index Funds for the Middle East

7/31/2019 Top 3 Index Funds for the Middle East

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Top 3 Exchange Traded Funds

for

the Middle East

ETF Comparison for

Egypt, Israel and Turkey against USA

A Market Brief

by

Steven Kim

MintKit Investing

www.mintkit.com

2012 MintKit.com
http://www.mintkit.com/http://www.mintkit.com/


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For the worldly investor, a handy way to access the Middle East including the

frontier markets of Egypt, Israel and Turkey is to take up the corresponding

exchange traded funds (ETFs) listed in the USA. In this article, we examine the

performance of the index funds in the context of the American market which

serves as the bellwether for the bourses of the world.

The ETFs are compared in terms of growth along with the risk entailed. For a

balanced view of performance, the period of evaluation should cover a stretch in

which the market has experienced a boom as well as a bust. The index funds

can then be weighed in view of the return on investment coupled with the degree

of volatility.

These factors are examined for the index funds dealing with Egypt, Israel and

Turkey; namely, EGPT, EIS and TUR respectively. Moreover, the three pools are

compared against the behavior of SPY, the flagship fund for the Americanbourse.

Comparing Exchange Traded Funds

To obtain a rounded view of performance, an investment vehicle ought to be

assessed over a longish period that includes at least one upsurge and one

blowup of the market. As a counterpoint, though, the field of exchange traded

funds is still in its infancy. For this reason, a lot of funds are relative newcomers

to the marketplace.

A case in point is the Market Vectors Egypt fund, which trades in the U.S. market

under the ticker symbol ofEGPT. The communal pool was launched only in

February 2010. As a result, the index fund does not have much of a history.

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Even so, the turmoil in the equity market over the past year turns out to be an

advantage for our purposes here. Given the crash of the U.S. bourse in the

second half of 2011, a span of two years is more than sufficient to include an

upswell as well as a meltdown of the market.

On a negative note, though, a couple of years is scarcely enough to lend a lot of

weight to precise tallies of performance for any type of asset. For this reason, we

will rely for the most part on a qualitative survey of the index funds.

In line with earlier remarks, the U.S. bourse serves as the queen bee of the stock

markets round the globe. Moreover, the most popular benchmark of the

American market among professional investors lies in the S&P 500 index. The

latter yardstick is represented by the index fund flying under the banner of SPY.

In this environment, we will compare the performance of the exchange traded

funds for the Mideast against their U.S. counterpart. We begin with a visual scan

of the action in the marketplace, then take a quick look at a clutch of numeric

results.

Graphic Portrait

In sizing up any kind of asset, an initial step is to examine a graphic display of the

market. Moreover, a composite chart of the price action can provide a visceral

grasp of the relative performance of the vehicles.

For this purpose, we turn to Yahoo Finance (quote.yahoo.com), the most popular

portal for investors on the information highway. In the chart below, the blue line

depicts the behavior of SPY over the course of 5 years ending in May 2012.

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By contrast, the red curve portrays the path of the index fund for Israel.

Meanwhile, the purple arc shows the corresponding trail for Turkey.

The disparity in age amongst the funds is plainly visible in the display. For

instance, the vehicles for both Israel and Turkey came to life in March 2008.

Since each vessel is less than half a decade old, its path does not cover the full

breadth of the chart.

As an aid to grasping the relative performance of the assets, the lines for both

EIS and TUR start off at the corresponding level for SPY. In other words, the

price levels have been recast so that the curves for Israel and Turkey upon their

inception match up with the status of their American counterpart at that stage.

Given the common point of reference, any divergence among the arcs from that

point onward reflects a gap in performance.

From the diagram, we can see that SPY thrashed around violently over the spanof half a decade. By the end of the assay period, though, the index fund

managed to recover most of the losses suffered during the financial crisis of 2008

as well as its aftershocks.

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The chart above spotlights the fact that the frontier markets were much more

volatile than the U.S. Despite the tumult, though, the index fund for Turkey ended

up pretty much where it started upon its debut in the marketplace.

Meanwhile, the vehicle for Israel was less flighty than its Turkish counterpart. On

the downside, though, EIS has been unable to shake off the doldrums since the

crash of the stock market in the second half of 2011. No doubt a big reason for

the funk lies in the ongoing war of words over the program of nuclear

development in Iran, a flap that could easily lead to a military clash in the years to

come.

On the other hand, the green line on the chart portrays the movements of the

index fund for Egypt. In line with the norm for most countries, the Egyptian

bourse plunged as the U.S. market slumped in spring 2010. On the upside,

though, EGPT began to recover during the second half of the year.

Then a bombshell popped up at the beginning of 2011, as a popular revolution in

Egypt toppled the dictator who had ruled the country for nearly three decades. In

the muddle that followed, the nation stumbled along without any form ofgovernment to speak of. Not surprisingly, the stock market went into free fall for

the remainder of the year.

On the upside, though, EGPT has been recovering smartly since the turn of the

year. The rebound reflected an uplift in investors spirits as they awaited a

general election to install a genuine president during the summer of 2012.

Performance Figures

As we noted earlier, the exchange traded funds for the Middle East can only offer

short histories. For this reason, it makes scant sense to quibble about small

differences in performance.

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Even so, we can examine a few numbers for the sundry vehicles. According to

Yahoo Finance, EGPT turned in a return ofnegative 10.32% over the course of a

year ending on 30 April 2012. On a cheery note, however, the index fund sported

a healthy gain of 36.58% since the beginning of 2012.

By contrast, the communal pool for Israel clocked a payoff of negative 24.12%

over the span of 12 months ending in April 2012. On the other hand, the

performance over the course of three years ending on the same date came out to

positive 9.60%. Another cheery result was a gain of positive 10.36% since the

beginning of 2012.

Meanwhile, the index fund for Turkey suffered a return of negative 25.18% over

the span of 12 months ending in April 2012. On the upside, though, the payoff

over the past three years came out to plus 21.96%. Moreover, the gain since the

onset of 2012 was positive 25.89%.

Wrapup of Past and Future Prospects

Over the long haul, the frontier markets of the Middle East represent some of the

most promising tracts for the cosmopolitan investor. On the downside, though,the entire region has had a long history of strife and chaos since at least the

dawn of civilization.

On the bright side, the popular revolutions across the Middle East over the past

couple of years has brought the light of democracy to an expanding fraternity of

nations. The Arab spring is a watershed that will surely usher in a wholesome era

of peace, stability and growth throughout the region in the millennium.

In that case, the beleaguered nations of the Mideast will be able to spread their

wings and fulfill their potential in earnest. For this purpose, the assets at hand

span the gamut from petroleum reserves to human resources.

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In the meantime, though, the intrepid investor has to contend with the gorgon of

high volatility in return for the prospect of bountiful returns over the decades to

come. In this effort, a promising place to start is to sift through the U.S. bourse

and mull over the lineup of exchange traded funds focused on Egypt, Israel and

Turkey.

Further Information

In sizing up an asset for investment in any domain, the prospective return has to

be weighed against the risk entailed. The crucial factors to consider are surveyed

in the section on Financial Riskat MintKit Core: http://www.mintkit.com/risk.

A primer titled How to Invest in Exchange Traded Funds talks about the crucial

issues relating to growth and risk for the popular vehicles. The review also

applies the generic concepts to a case study of index funds for the emerging

markets of Brazil, China, India and Russia http://w.mintkit.com/2012/02/how-to-

invest-in-exchange-traded-funds.html .

The data available on exchange traded funds is often patchy, faulty and/or

misleading. The stumbling blocks, along with defensive moves for the guardedinvestor, are discussed in an article on Cruddy Information on Exchange Traded

Funds under the section on Investment Funds at MintKit:

http://www.mintkit.com/investment-funds .

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Keywords:

ETF, ETFs, Exchange Traded Funds, Index, Top, Egypt, Israel, Turkey, USA,

EGPT, EIS, TUR, SPY, Performance, Risk, Volatility, Middle East, Mideast

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Top 3 Index Funds for the Middle East