There are several ETF options for investors that are seeking to invest in the Middle East region of the world.
The largest, by assets, is the WisdomTree Middle East Dividend ETF GULF that has $80 million under management.
The ETF has 60 percent of its portfolio in two countries – Qatar and the United Arab Emirates (U.A.E.). On May 2, iShares debuted two new ETFs that concentrate solely on Qatar and the U.A.E.
iShares MSCI Qatar Capped ETF QAT
The country is in the midst of a population boom; according to the IMF, Qatar’s population is expected to grow by 25 percent from 2014 to 2019. At the same time, GDP growth is estimated to come in approximately 2.5 times higher than that of the U.S.
The country is also preparing to host the 2022 World Cup. The World Cup efforts, combined with an effort to improve infrastructure, have the government planning to spend $285 billion in the next ten years on projects.
The ETF is heavily weighted in the financials (56 percent), followed by telecom and the industrials. As the country expands into non-energy businesses, it will be a boom for the financial system and related stocks.
The top ten stocks are not household names and not one trades on a major exchange in the U.S. Therefore, the best way to gain access to the booming country is through the newly launched ETF.
iShares MSCI UAE Capped ETF UAE
The U.A.E. is in a similar situation to Qatar in that it has growth estimates well above the U.S. and other developed nations, it is looking to diversify into non-oil industries and they have an event (2020 World Expo) that will lead to high infrastructure spending.
The two stock exchanges within U.A.E., Dubai and Abu Dhabi, both ended 2013 with gains near the 100 percent threshold.
This year, the Dubai Financial Market General Index is up another 55 percent and the Abu Dhabi Securities Market General Index is up 17 percent. Unfortunately, the two ETFs only began trading two weeks ago, but there still appears to be more upside for the two countries.
UAE is heavily weighted in the financial stocks with the sector making up 69 percent of the allocation and the industrials make up 21 percent. Emaar Properties is the largest holding with an allocation of 22 percent.
Both ETFs charge an expense ratio of 0.61 percent, which is not too high considering the concentrated exposure it offers investors. Trading volume has been light since inception, but as more investors begin to realize the opportunities in the two countries there should be a significant pickup in the months ahead.
The major risk with either ETF is that they bear country-specific risk. An ETF such as GULF concentrates on the region, however the added diversification does take down the risk potential slightly.
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