Gulf ETFs Rising on Oil Rebound
Oil has been making headlines over the past one and a half years owing to huge swings in its prices. Oil prices took a U turn after touching a 12-year low this February. This is especially true as oil crossed the $40/barrel mark and regained momentum, indicating that the worst might be over for the commodity (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs).
Notably, WTI crude oil ETF United States Oil Fund (USO) added about 13.2% in the last five trading sessions (as of April 11, 2016) and Brent crude oil ETF United States Brent Oil (BNO) posted gains of about 13.5% during the same timeframe.
The latest boost in oil price came with improving demand/supply trends. Talks of production freeze from giant oil producers including Russia and Saudi Arabia have been among the rally’s biggest drivers. Meanwhile, disruptions in Nigeria have led to a tightening of supply, which albeit is short term (read: Oil ETFs in Focus on Oil Output Freeze Talks).
Signs of decreasing production can also be seen in the U.S. With oil drilling activity falling in the country, output is expected to continue to decline in the coming weeks. However, increasing production in Iran and weak global economic growth could lead to further swings in oil prices.
Not surprisingly Gulf ETFs are the ones to emerge as winners after oil neared the $40/ barrel mark. In particular, Market Vectors Gulf States Index ETF (MES), iShares MSCI UAE Capped ETF (UAE), iShares MSCI Saudi Arabia Capped (KSA) and WisdomTree Middle East Dividend Fund (GULF) gained 4.5%, 3.8%, 2.7% and 1.7%, respectively, in the last five days. These funds should be on investors’ watch list of funds that are likely to gain further if the current oil price trend continues (read: 5 ETFs to Buy if Oil Stays at $40).
Market Vectors Gulf States Index ETF
The fund provides exposure to 56 stocks in the Gulf Cooperation Council (GCC) region by tracking the Market Vectors GDP GCC Index. It is often overlooked by investors as depicted by its AUM of $6.8 million and average daily volume of under 2,000 shares. The fund charges a high annual fee of 99 bps from investors. It has a Zacks ETF Rank of 3 (Hold) with a Medium risk outlook (see: all the Africa-Middle East Equity ETFs).
iShares MSCI UAE Capped ETF
This ETF targets United Arab Emirates stocks and follows the MSCI All UAE Capped Index. Holding 33 stocks in its basket, it has been able to manage $23.6 million in AUM so far and charges 64 bps in annual fees. Volume is light at around 14,000 shares a day on average. It has a Zacks ETF Rank of 4 (Sell) with a High risk outlook.
iShares MSCI Saudi Arabia Capped ETF
This fund provides exposure to 52 Saudi Arabian stocks by tracking the MSCI Saudi Arabia IMI 25/50 Index. It has accumulated $4.3 million in its asset base while it sees volume of 1,300 shares a day on average. KSA charges 74 bps in fees per year.
WisdomTree Middle East Dividend Fund
This ETF follows the WisdomTree Middle East Dividend Index, which measures the performance of the companies that pay regular cash dividends. It holds a basket of 71 stocks and has amassed $22.8 million in its asset base while it trades in a small volume of 6,000 shares a day. Expense ratio came in at 0.88%. It has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Middle East Stocks Crash on Iran Sanctions: ETFs to Watch).
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US-OIL FUND LP (USO): ETF Research Reports
US BRENT OIL FD (BNO): ETF Research Reports
WISDMTR-ME DIV (GULF): ETF Research Reports
ISHARS-MSCI SA (KSA): ETF Research Reports
MKT VEC-GULF ST (MES): ETF Research Reports
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