Investing in Egypt
Egypt, widely considered a frontier market, is gaining popularity among foreign investors. The country holds a place in the Goldman Sachs list of the “Next Eleven” economies, and has the potential to overtake many of the G20 nations. In November 2016, Egypt’s central bank floated its currency to boost investments. This led to a steep fall in the Egyptian pound against the dollar, while stocks gained.
Foreign investors seeking exposure in Egypt could invest in ETFs that offer diversification through investment in a single US security. Alternatively, investors wanting direct exposure could consider ADRs of Egyptian companies listed on US Stock exchanges.
The most popular ETF for U.S. investors is the Market Vectors Egypt Index ETF (EGPT). With assets under management of $57 million, it offers concentrated exposure to companies that derive at least 50% of their revenues from Egypt. Financials is the top sector with 34% of assets, followed by telecommunications, basic materials, and consumer non-cyclicals. The fund is down 26% over the last one-year period, but year to date, it has gained 5.5%.
Investors could also consider investing in the WisdomTree Middle East Dividend Fund (GULF) or the VanEck Vectors Africa Index ETF (AFK). These funds invest 4.5% and 9.7% of their holdings in Egypt based companies. YTD these ETFs have gained 9% and 0.6%, respectively.
A number of Egyptian companies are listed on the New York Stock Exchange in the form of ADRs. They provide a much easier way for investors to buy Egyptian stocks, with less risks related to liquidity.
Some popular Egyptian ADRs that investors could consider are: