Share:

Among single-country exchange traded funds tracking developing economies, funds offering exposure to the Middle East and North African region often go overlooked by investors. One of those funds, the VanEck Vectors Egypt ETF EGPT 0.15% could be worth revisiting.

EGPT, the only ETF trading in the U.S. dedicated to Egyptian stocks, is up more than 3 percent this year and nearly 19 percent over the past 12 months. Still, investing in Egypt, North Africa's largest economy, is not for the faint of heart. The country has bouts of political volatility, a checkered human rights record and is suspected of being home to Islamic State militants.

And there is the 14.80-percent yield on Egypt's 10-year bonds, another trait illustrating the point that EGPT is not your run-of-the-mill single-country investment. On the other hand, there are signs of improvement in the Egyptian economy.

Reasons To Consider EGYPT

“Egypt's first interest rate cut since exchange rate liberalization has been made possible by an improvement in macroeconomic stability, underpinned by more orthodox policy settings under the country's International Monetary Fund program,” said Fitch Ratings. “These factors were reflected in our revision of the outlook on Egypt's 'B' sovereign rating to Positive last month.”

EGPT, which turned 8 years old earlier this month, holds 28 stocks. As is the case with many emerging markets single-country ETFs, the Egypt fund is heavily allocated to financial services stocks. That sector represents 23.3 percent of the fund's weight. Real estate and materials stocks combine for almost 40 percent of EGPT's roster.

The Central Bank of Egypt cut its overnight deposit and lending rates by 100 basis points on Feb. 15, to 17.75 percent and 18.75 percent, respectively, according to Fitch. 

“Its main operation and discount rates were also cut by 100bps, to 18.25 percent. The CBE had increased rates by 700bps since devaluing the Egyptian pound in November 2016.”

Know What You Own

It is prosaic advice, but ETF investors should always know what they own. In the case of EGPT, investors, perhaps unknowingly, are embracing a small-cap fund. The weighted average market value of the fund's holdings is just $1.6 billion: small-cap territory. Over 90 percent of EGPT's components are classified as mid- or small-cap stocks.

Additionally, EGPT's three-year standard deviation of 27.9 percent is nearly double the comparable metric on the MSCI Emerging Markets Index.

Share: Feed news

Benzinga does not provide investment advice. All rights reserved.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

EUR/USD hovers above 1.0750 amid cautious markets

EUR/USD hovers above 1.0750 amid cautious markets

EUR/USD is trading sideways above 1.0750 in European trading on Monday. The pair defends bids amid a cautious mood and sluggish US bond yields. The US Dollar is struggling for upside traction, as traders refrain from placing fresh bets ahead of Tuesday's US inflation data. 

EUR/USD News

GBP/USD treads water near 1.2550, as focus shifts to key UK/US data

GBP/USD treads water near 1.2550, as focus shifts to key UK/US data

 GBP/USD is holding steady near 1.2550, lacking a clear directional bias in European morning on Monday. The pair is struggling amid investors' caution ahead of key economic data and central banks' meetings from the US and the UK this week. 

GBP/USD News

Gold price struggles near two-week low amid modest USD strength, reduced Fed rate cut bets

Gold price struggles near two-week low amid modest USD strength, reduced Fed rate cut bets

Gold price remains under some selling pressure for the second successive day on Monday. Reduced bets for a March Fed rate cut move and a modest USD uptick weigh on the metal.

Gold News

Bitcoin braces for volatility-filled week with November CPI data release, Fed decision

Bitcoin braces for volatility-filled week with November CPI data release, Fed decision

Bitcoin is likely to experience heightened volatility this week with the upcoming release of November CPI data. BTC price suffered a correction of nearly 4% in the past 24 hours, ahead of the key macroeconomic events scheduled for the week.

Read more

Central stage: The big three central banks in focus

Central stage: The big three central banks in focus

As we approach the end of the year, this week holds particular significance for macro observers. The three major central banks, often referred to as the "Big 3" – the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE) – are all scheduled to convene.

Read more

Majors

Cryptocurrencies

Signatures