Market Vectors Gulf States ETF (NYSEArca: MES) seeks to replicate, net of expenses, the Dow Jones GCC Titans 40 Index. The fund invests at least 80% of assets in securities that comprise the index. It may utilize derivative instruments and P-Notes to seek performance that corresponds to the index. The fund may invest in companies located in the following countries: Bahrain, Kuwait, Oman, Qatar, United Arab Emirates and Saudi Arabia.
Since trading at 41.44 since its launch this past summer, MES closed today at $19.28. Intuitively, this makes sense, given if nothing else the combination of the credit crisis and lower oil prices. Though as one analyst pointed out, these shocks are not all bad for the Gulf Cooperation Council (GCC):
“Cheaper oil along with a slowdown in local and international financing, could do what the region’s central bankers have so far failed to: rain in the region’s double digit inflation. The GCC countries continue to book budget surpluses as long as the price of oil does not drop below $50/ barrel.”
Over sixty percent of the fund’s holdings are in financial services and telecommunications, and in fact six of the top ten holdings (see below) are headquartered in Kuwait. In essence, therefore, you can think of MES as a way to tap Kuwait, but perhaps not much else.
Speaking of Kuwait, its exchange (KSE) has plummeted (the main index is down roughly 47% since its July 26th peak) since this summer, but headlines of late are cause for optimism. Last week the Exchange announced that the country’s Central Bank had cut the discount rate by 0.50 percent to 3.75 percent–the third cut in as many months. That said, the market went on to lose over 650 points since Dec 15th, which pundits chalked up to continued concerns over earnings of the local companies (especially in the banking and investment sectors), the slide in oil prices, and ripple effect of the ongoing global financial crisis.
On Tuesday, however, the Exchange snapped a five-day streak of unabated losses with a solid rebound, buoyed by news that Kuwait Investment Authority, the state’s investment arm, had allocated a part of its long term investment fund to invest in the local market. Per the Arab Times, the market surged 227.5 points, the biggest single day gain in 2 months, spurred by renewed buying in blue chips. National Bank of Kuwait and Wataniya paced the gainers, rallying 8.3 percent and 5.6 percent respectively. And moderate gains were also seen some of the mid and low priced stocks as well. In related news, National Bank of Kuwait state this past week that it had won the central bank approval to buy up to 40 percent in Islamic lender Boubyan Bank. The three month approval period started on Dec 22.
Another company making news is the top holding in MES, Mobile Telecommunications Company KSC (Zain), which announced last week the commencement of commercial services in Ghana with the launch of the first 3.5G network on the continent outside South Africa (Danfonds covered this story as well). Zain Ghana’s network will offer its customers ultra high-speed internet access and for the first time in Ghana the ability to make video-calls and use rich multimedia content including sending video clips, music and pictures at the touch of a button. With the launch, Ghana brings the number of countries in which ‘One Network’ operates to 17.
|Mobile Telecommunications Company K.S.C (Kuwait)||9.34%|
|National Bank of Kuwait S.A.K.||8.87%|
|Kuwait Finance House||8.22%|
|Emaar Properties PJSC (UAE)||7.55%|
|NATIONAL INDUSTRIES GROUP HOLDING (Kuwait)||5.54%|
|Qatar National Bank SAQ||3.48%|
|DP World Ltd (UAE)||3.20%|
|Commercial Bank of Kuwait||3.08%|
|Global Investment House (Kuwait)||2.95%|