Per its recent news release, “(EGPT) is the 24th ETF offered under Van Eck’s Market Vectors brand and joins the firm’s growing international equity lineup, which includes Market Vectors ETFs focused on Africa (AFK), Brazil Small-Cap (BRF), the Gulf States (MES), Indonesia (IDX), Poland (PLND), Russia (RSX) and Vietnam (VNM). Van Eck also offers hard assets, specialty and fixed income ETFs and, as of the end of 2009, was the sixth largest ETF provider in the U.S. with over $12.0 billion in ETF assets under management.”

The fund will roughly track the Market Vectors Egypt Index and its ten largest holdings at present include: Commercial International Bank 8.6%, Orascom Construction Industries 7.9%, Orascom Telecom Holding SAE 7.6%, Egyptian Financial Group-Hermes Holding 6.3%, Egyptian Kuwaiti Holding Co 5.9%, Talaat Moustafa Group 5.5%, Egyptian Co for Mobile Services 5.3%, Elswedy Cables Holding Co 5.29%, Al Ezz Steel Rebars SAE 5.0%, and Telecom Egypt 4.8%.  As one observer noted, EGPT’s underlying index consists of 28 companies and has 5.47% dividend yield, meaning that even after subtracting the expense ratio (capped at 0.94%), the fund may be able to generate a dividend yield in excess of 4%.

Egypt’s EGX30 Index has been Africa’s best performer YTD, rising nearly 12%, and there are a plethora of reasons to be bullish on the country in the long term.  As one article from last December contrasting the country’s steady growth with the boom and bust of Dubai reiterated:

Egypt has spent years reforming its banking sector and attempting to increase investment from companies abroad.  The Central Bank has tightened banking regulations, while the government has cut red tape on trade.  It has also embarked on massive infrastructure projects, such as building a modern international terminal to serve the Cairo airport and beginning construction on a third subway line.

The Egyptian stock market has unveiled new indexes, grouping different companies together to make their performance easier to track and to encourage trading.  The initiatives paid off. In 2008, the World Bank ranked Egypt as one of the top 10 reformers worldwide in their ease of “Doing Business” report.

The country’s economy grew 4.7% in the last fiscal year, down from 8% the year before.  But that is still higher than many developing economies such as Turkey, which grew only 1.1% in 2008 and is expected to shrink 5% in 2009, according to the IMF.  Egypt is predicted to grow another 5% this year.

A report this week quoted the country’s Economic Development Minister Osman Mohamed Osman, who predicted that Egypt’s economy, spurred by rising exports, might grow by 5.5% in fiscal 2010/11 and attract up to $10 billion in foreign direct investment (FDI).  That said, diminishing demand from the U.S. and Europe might make the figure hard to reach.  The rub lies within Gulf economies that may pick up the slack.  In essence, therefore, it may be asserted that an investment in Egyptian markets is a proxy on continued fiscal strength and cash flows coming from the Gulf.  “As long as there are current account surpluses [in the GCC economies], I think Egypt will continue to benefit from the flows,” says London-based Ahmet Akarli, a senior economist for Turkey and the Middle East at Goldman Sachs.  “These flows could go into all sorts of different investment opportunities – they could be FDI, they could be portfolio inflows [investors buying stocks the Egyptian exchange] – it really depends on what Egypt can offer.  It’s hard to say where the money will end up being utilized, but it’s clear that Egypt will be, among others, an important destination.”

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