Egypt ETF in Focus on New Economic Investment; Growth Ahead? - ETF News And Commentary
After years of political and economic turmoil, Egypt seems to be determined to woo foreign investors to bring in a fresh lease of life to its cash-strapped economy. Egypt has signed deals for hundreds of billions of dollars worth of investments with international companies at a three-day economic conference to rebuild its ailing economy. Let’s not forget that Egypt was once a top destination for foreign investment (read: 2 Low Risk ETFs to Watch as Global Market Totters).
Oil and gas major British Petroleum (BP) has committed to invest $12 billion over four years to develop gas resources – the single largest foreign investment deal ever. German industrial giant Siemens has also signed $10.5 billion in deals and memorandums of understanding to construct several power plants in Egypt. Other foreign companies like have also announced major investments in the fields of power generation as well as oil and gas exploration and production. Arabian countries have pledged to invest $12 billion in investments to help stabilize the Egyptian economy.
Moreover, the country’s government has unveiled several other measures such as a cut in income tax rates, establishing an independent regulator for the oil and gas sector in the near future and other new mechanisms to resolve commercial disputes. Also, the country has announced plans to build a new administrative and business capital east of Cairo that is expected to house seven million people and generate 1.5 million jobs.
Given the flurry of deals and Egypt’s stepped-up economic measures, the International Monetary Fund (IMF) expects the Egyptian economy to expand by 3.8% for the fiscal year ending July, and 4.3% in the 2015-2016 fiscal year.
ETF Reaction
Given the recent spurt in activities in Egypt and the optimism surrounding the country, Market Vectors Egypt Index ETF (EGPT) has returned 3.4% in the past two weeks. Investors should keep a close eye on the product to enjoy any upside in the upcoming weeks. Below we have highlighted some of the details about the product.
EGPT in Focus
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 holding 27 securities in its basket has amassed $50.8 million in its assets base. The expense ratio came in at 0.98% while the average daily trading volume is weak at just 10,000 shares (see: all Africa-Middle East ETFs here).
In terms of holdings, the product is concentrated among the top firms with 62% allocation to the top 10 holdings. Commercial International Bank, Talaat Moustafa Group and Orascom Telecom Holding take the top three spots (read: 3 Financial ETFs for Dividend and Growth).
As far as sectoral holding is concerned, the product is pretty concentrated in the financial sector with half of the total fund allocation, followed by double-digit allocation to telecom and materials
The ETF has a Zacks ETF Rank of 4 or Sell rating, indicating that the long-term fundamentals of the product are still weak. Egypt needs to deliver on its promises made at the conference to regain the faith of the investors in its economy (read: 5 Sell-Rated Sector ETFs to Avoid).
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MKT VEC-EGYPT (EGPT): ETF Research Reports
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