Monday, August 9, 2010

Tracing Investment Opportunities In Egypt

When we speak of Egypt, the first thing that comes to mind is the images of the Great Pyramid at Giza, the Nile Delta and the ancient Egyptian civilization. Far from being a civilization located on both sides of the river Nile, the modern day Egypt is the most populated country in the Middle East and the third most populous on the African continent. Despite technically considered part of geo-economic area called Middle East Egypt lies in the continent of Africa and its per capita GDP is below the global average, trailing behind other emerging markets such as Brazil, South Africa, China, but ahead of India. Egypt’s economy is much more diversified than many in the region. Oil and gas make up only about 15% of the country’s GDP, compared to as much as 50% for many oil rich states. In addition to a strong financial sector, tourism, agriculture and industrials account for significant portions of GDP.

Investors wanting to invest in the growing Egyptian economy can do so via the Van Eck Global launched the Market Vectors Egypt Index ETF which is the first US traded Egypt ETF. The fund launched on 18th February 2010, invests in 28 companies that derive at least 50 percent of their revenues from Egyptian operations. The fund comes with a price tag of 0.94 percent. EGPT is the latest off-the-beaten-path country ETF from the fast-growing Van Eck, which recently launched ETFs tied to Poland, Indonesia and Vietnam as well. EGPT follows the Market Vectors Egypt Index, providing exposure to publicly traded companies that are domiciled and primarily listed on an exchange in Egypt or that generate at least 50% of their revenues in Egypt. The Egypt ETF has a heavy weight in the financials (42%) and industrial materials (31%) sectors, a common occurrence among large cap-focused emerging markets ETFs

EGPT: Sector Breakdown

Financials 42%
Telecommunications 17%
Industrials 16%
Materials 14%
Energy 4%
Consumer Discretionary 3%
Consumer Staples 2%

EGPT: Top Ten Holdings

Commercial International Bank 8.48%
Orascom Construction 8.44%
Orascom Telecom Holding 6.81%
EFG-Hermes Holding 6.60%
Mobinil-Egyptian Mobile Serv 5.88%
Egyptian Kuwaiti Holding 5.77%
TMG Holding 5.39%
Elswedy Cables Holding 5.13%
Al Ezz Steel Rebars 5.02%
Telecom Egypt 4.59%

Egyptian Stock Market

The EGX 30 is the main index of the Egyptian exchange. The EGX 30 is comprised of the 30 largest stocks traded on the exchange, and is quoted in U.S. dollars. A total of 179 stocks were listed on the Egyptian exchange in early 2010 and another 27 were trading over-the-counter. Regarding market capitalization, Egypt is the second biggest African market after South Africa. Many stocks are very liquid and can be traded easily and with low transaction cost. Foreign participation is still quite low, as it is in most other African markets.

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