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Market Overview

Middle East Volatility Affecting ETFs


The Dubai stock market started the week on a wild ride with a drop of 6.5 percent on Sunday (the stock market is closed Friday and Saturday). The index was able to rebound on Monday with a gain of 1.9 percent, the best one-day performance in three weeks. The selloff was wide spread in the region and the one-day bloodbath wiped out more then $60 billion from the Middle East equity markets on Sunday.

The net tally after the two-day wild swing is still negative as investors considered about the stability of the regions equity markets. In the United States, there are a number of ETFs that track the performance of the regions stock markets. The rebound on Monday before the markets opened for the week in the United States, so the damage was not been as bad as it could have been.

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The iShares MSCI Qatar Capped ETF (NYSE: QAT) tracks a broad range of companies solely located in the frontier market of Qatar. With 57 percent of the total 27 holdings invested in the financial sector of the country, it is a considered fairly concentrated. However that comes with the territory when investing in a country specific fund, especially one as small as Qatar. The top holdings include Masraf Al Rayan Q.S.C. with a 15 percent holding, Qatar National Bank at 13 percent and Industries Qatar at 10 percent.

Since QATs inception on April 29 it is up less than one percent. The expense ratio is 0.61 percent.

TheiShares MSCI UAE Capped ETF (NYSE: UAE) tracks 25 holdings in the United Arab Emirates across five sectors, with the most weighted sector being financials at 69 percent. The top individual holdings include Emaar Properties P JSC with a 16 percent holding, DP world LTD at 9 percent and Al Dar Properties Co. at 9 percent.

UAE was launched on April 29 as well and is down 11 percent since its inception. The ETF has an expense ratio of 0.61 percent.

Two additional ETFs whose holdings have high exposure to Qatar and the United Arab Emirates are the Market Vectors Gulf States Index ETF (NYSE: MES) and the WisdomTree Middle East Dividend Fund (NYSE: GULF). Qatar and the UAE account for 60 percent of GULF and 59 percent of MES. Both ETFs have held up very well during recent market pullbacks, but are falling on the current situation in the Middle East.


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