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Egypt ETF in Focus After Hamas-Israel Ceasefire


Market Vectors Egypt ETF (EGPT) was up about 1% in U.S. trading Wednesday afternoon following reports that Egypt announced a ceasefire agreement between Israel and the Islamist Hamas movement.

After rallying about 50% this year, the Egypt-focused exchange traded fund has come against headwinds. Egypt’s economy is at risk now that Israel’s latest offensive against Hamas could have backlash, and President Mohammed Morsi is regulating various corporations.

“EGPT bottomed at just over $10 in late June and was found flirting with $16 by mid-September, but the lone ETF exclusively devoted to the North African country could be in for some downside. Government disputes with Egyptian companies look to be the culprit. Egyptian equities are trading at two-month lows as investors are becoming skittish the government is not doing enough to solve the disputes,” Bloomberg reported.

The Egypt ETF was up 51.3% year-to-date, proving this emerging market was resilient due to lower correlations with developed markets. EGPT even rallied September 11, when protesters stormed the U.S. embassy in Cairo, reports Benzinga on Nasdaq. Tensions are rising in Egypt as Israel’s newest offensive against the Hamas in the Gaza strip will be the biggest headwind for this economy. EGPT has slipped about 5.2% in November. [Index ETFs for Emerging Markets in Trouble?]

Egyptian equities recently had their worst performance as Commercial International Bank Egypt slid to its lowest level in two weeks. This is Egypt’s largest lender, and accounts for about 9.5% in EGPT. The ETF also gives about half of the holdings to the financial sector, reports Benzinga on MarketWatch.

The government is taking steps to gain money owed from unmentioned firms and this has beaten down the mining industry and the materials sector. Unemployment is rising at 12.5%, and some analysts say it is higher when accounting for the youth. Overall, the investment in new industry has halted and geopolitical risk remains a big deciding factor for the fate of EGPT. [Egypt ETF Rallies Over 50% For Year]

Analysts say that the Morsi administration will have much influence on the future of the economic picture in Egypt, depending on how it deals with low foreign reserves and even lower foreign investment[Tom Lydon, Chuck Jaffe Talk ETF of the Week: Egypt]

Market Vectors Egypt ETF

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.