Market Overview

Israel ETF Plunges After Hamas Strike

Shares of the iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS) are off 2.2 percent and trading at the lows of the day on news that Ahmed Said Khalil al-Jabari and another Hamas official were killed during an Israeli airstrike on the Gaza Strip. Volume in the iShares MSCI Israel Capped Investable Market Index Fund, the lone Israel-specific ETF, is close to double the daily average.

The Israeli strike follows a rash of attacks against the country by the Palestinian Islamist group Hamas. Militants in Gaza have fired more than 110 rockets towards southern Israel since Saturday, when four soldiers were wounded in an anti-tank missile attack on an Israeli army jeep, the BBC reported.

News of the strikes is also pressuring the Market Vectors Egypt ETF (NYSE: EGPT), which is off 0.75 percent in midday trading on thin turnover.

The iShares MSCI Israel Capped Investable Market Index Fund, which has almost $80 million in assets under management, also has a mixed history of post-conflict performance.

For example, the ETF actually rallied during a 2008 Hezbollah-lead conflict that caused dozens of deaths in nearby Lebanon. EIS debuted just two months before that event. In 2010 following Yemen's crackdown on al-Qaeda EIS proceeded to trade below $50 by the time the first battle of Lawdar ended in late August 2010.

Last year, the ETF started to falter when the Arab Spring movement gained steam. From February 18 through the end of the year, EIS plunged almost 31 percent. This year, more than 2,900 deaths were reported in June and nearly 2,800 in July in Syria. EIS bottomed around $35 in July and proceed to trade above $43 by mid-October.

However, the latest round of violence to afflict an already tenuous region could technically damaging to EIS. News of the latest offensive against Hamas has sent EIS below its 50-day moving average. The ETF is trading just one percent above its 200-day line and that is relevant because many technical analysts believe it is a bearish sign when securities violate long-term moving averages.

Making matters trickier for investors in EIS is harsh rhetoric from both sides. Israel has said its anti-Hamas offensive could be escalated Hamas spokesman Abu Zuhri said: "Israel will regret the moment they even thought of doing this," the BBC reported.

While Egypt is not directly involved in this conflict, the Market Vectors Egypt Index ETF (NYSE: EGPT) could also be vulnerable to added downside. The ETF has proved resilient to regional strife this year. EGPT even rallied on September 11 as protesters attacked the U.S. embassy in Cairo.

However, investors' appetite for risk appears low at the moment and after flirting with $16 in September, EGPT is now trading below $14.75. That fund also fell below its 50-day moving average earlier this month.

For more on ETFs, click here.

Posted-In: Long Ideas News Short Ideas Specialty ETFs Emerging Market ETFs Technicals Events Global Best of Benzinga

 

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