Egypt’s Market Opening, Two ETFs Await (EGPT, AFK)

The Market Vectors Egypt Index ETF (NYSE: EGPT) is very close to getting prove whether it is an exchange-traded fund or whether it is an exchange-traded price discovery vehicle.  After nearly two months of being closed, this Wednesday is supposed to mark the return of equity trading in Cairo.

The military ruling the country now has decided to allow the Egyptian Exchange to reopen, but trading is going to be rather curbed, running from 10:30 AM to 1:30 PM local time.

Also came word today from the Egyptian Exchange that Prime Minister Essam Sharaf has accepted the resignation of Dr. Khaled Serry Siam and appointed Mohamed Abd el Salam, the Chairman of MISR for Clearing and Settlement, as Chairman of the Egyptian Exchange for the coming period of 6 months.

Another big change is going to be trading curbs.  We have seen mixed data on the exact curb rules so we’ll look later for additional details.  Frankly, U.S. investors will only be confused further by this.  Those who want to invest in Egypt via the Market Vectors Egypt Index ETF (NYSE: EGPT) will have to deal with uncertainty.  Despite regime change, the value of these equities and the Egyptian market has likely slid due to the GDP and growth that was hit hard during the political turmoil.

Another ETF which will give some implied exposure to Egypt and the region is Market Vectors Africa Index ETF (NYSE: AFK).  It tracks the Dow Jones Africa Titans 50 Index.  At the most recent date for tracking, exposure to Egypt was 20.51% of the fund.  That compares to 28.91% weighting for South Africa, 16.46% for Nigeria, and 21.52% for “Offshore.”

With the 5% and 10% trading curbs being put in place, it is not likely to be until next week that trading levels and true price levels have been found.  Even then, that assumes that the exchange and that the regulatory oversight groups don’t try to halt or further curb trading all over again.

JON C. OGG