Top 10 Russia, Middle East, Africa ETFs

 

In this profile we review this large region but where there exist only 10 suitable ETFs to feature. Some parts of the region would be in the Pioneer category meaning they're truly in their infancy for investors. Others are quite mature and have existed for quite some time with high AUM (Assets under Management) investor interest and acceptance.

Demographics play a key role and in that regard selections in this diverse region are extremely varied. Russia is beginning to struggle with an aging population while the MENA (Middle East & Africa) sectors have a more youthful and developing consumer market.

Russian and South African markets are rich in natural resources making for volatility along with the price action in commodity markets. South Africa has both a high level natural resources and excellent demographics meaning a rising consumer base.

During 2011 the MENA region has been swept up in the Arab Spring as long ruling dictators have been thrown out and new regimes will take their place. It is uncertain how these developments will affect what markets exist in affected countries like Egypt and so forth. 

We rank the top 10 ETF by our proprietary stars system as outlined below. But given the diversity of this sector making these choices becomes a greater challenge.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

#1: Van Eck Russia ETF (RSX)

RSX follows the DAXglobal Russia+ Index which includes companies based in Russia, trading in Russia or on leading exchanges globally. The fund was launched in April 2007. The expense ratio is .62%. AUM (Assets under Management) equal $1.6 billion and average daily trading volume is 5M shares. (This compares to July 2011 with AUM $3.1 billion and average daily trading volume is nearly 4M shares indicating distribution.)  As of early January 2012 the annual dividend yield was 2.14% and YTD return 5.400%.

Russian markets are dominated by energy and other commodity markets. As they go, so goes RSX.

Data as of First Quarter 2012

RSX Top Ten Holdings
  1. OAO Gazprom ADR (OGZPY): 8.58%
  2. OJSC OC Rosneft GDR (ROSN): 7.56%
  3. Sberbank of Russia OJSC: 7.38%
  4. Lukoil Company ADR (LUKOY): 6.43%
  5. Oao Novatek GDR (NVTK): 5.98%
  6. Surgutneftegaz OJSC ADR (SGTZY): 5.75%
  7. MMC Norilsk Nickel ADR (NILSY): 4.54%
  8. Bank for Foreign Trade Vneshtorgbank JSC VTB Bank GDR (VTBR): 4.16%
  9. JSC Uralkali GDR (URKA): 4.11%
  10. Gazprom Neft OJSC (GZPFY): 3.81%

 

#2: iShares Turkey ETF (TUR)

 

TUR follows the MSCI Turkey Investable Market Index which measures the overall performance of the Turkish equity market. The fund was launched in March 2008. The expense ratio is .61%. AUM equal $383 million and average daily trading volume 227K shares. (This compares to July 2011 data of AUM $560 million and average daily trading volume is 260K shares.) As of early the annual dividend yield was 2.85% and YTD return -.15%.

Severe negative performance in 2011 was the result of domestic unrest between the military, secular and non-secular groups. In addition investor flight from high beta markets was another concern along with MENA unrest overall. That said, Turkey is one of the sole Islamic democracies in the region and has a large and growing consumer sector.

Data as of First Quarter 2012

TUR Top Ten Holdings & Weightings
  1. Turkiye Garanti Bankasi A.S. (GARAN): 13.29%
  2. Akbank TAS (AKBNF): 7.84%
  3. Turkcell Iletisim Hizmetleri AS (TCELL): 7.07%
  4. Turkiye Is Bankasi C Share (ISCTR): 6.02%
  5. Tupras-Turkiye Petrol Rafineleri A.S. (TUPRS): 5.27%
  6. Anadolu Efes Brewery ve Malt Sanayi A.S. (AEFES): 4.55%
  7. Bim Birlesik Magazalar A.S. (BIMAS): 4.37%
  8. Turk Telekomunikasyon (TTKOM): 3.99%
  9. Koc Holding A.S. (KCHOL): 3.86%
  10. Turkiye Halk Bankasi A.S. (HALKB): 3.48%

#3: iShares Israel ETF (EIS)

EIS follows the MSCI Israel Capped Investable Market Index which follows the large cap issues within the Israeli stock market. The fund was launched in March 2008. The expense ratio is .61%. AUM equal $78 million and average daily trading volume is 15K shares. As of early January 2012 the annual dividend yield is 3.36% and YTD return 3.44%.

You'll note in the holdings that Teva Pharmaceuticals is the dominant holding and has been a popular institutional investment in the sector.

Data as of First Quarter 2012

EIS Top Ten Holdings & Weightings
  1. Teva Pharmaceutical Industries Ltd (TEVJF): 23.54%
  2. Israel Chemicals Ltd. (ISCHF): 9.66%
  3. Bank Hapoalim B.M.: 7.37%
  4. Bank Leumi Le-Israel: 6.98%
  5. Bezeq The Israel Telecommunication Corp Ltd: 4.51%
  6. Nice Systems Ltd: 4.13%
  7. The Israel Corp: 3.07%
  8. Israel Discount Bank Ltd.: 2.38%
  9. Mellanox Technologies, Ltd. (MLNX): 2.14%
  10. Mizrahi Tefahot Bank Ltd.: 2.12%

#4: iShares South Africa ETF (EZA)

EZA follows the MSCI South Africa Index which tracks the overall South Africa equity market. The fund was launched in February 2003. The expense ratio is .61%. AUM equal $507 million and average daily trading volume is 290K shares. (This compares to July 2011 with AUM at $600 million with average daily trading volume of 300K shares.) As of early January 2012 the annual dividend yield was 3.11% and YTD of 2.10%.

As most know South Africa is a resource rich country with excellent reserves of precious and base metals. Perhaps little known is the country has a good demographic base giving a boost to a growing consumer sector.

Data as of First Quarter 2012

EZA Top Ten Holdings & Weightings
  1. Mtn Group Limited (MTNOF): 11.69%
  2. Sasol, Ltd. (SOL): 10.08%
  3. AngloGold Ashanti Limited (AULGF): 6.95%
  4. Naspers Ltd (NPN): 6.67%
  5. Standard Bank Group Ltd. (SBK): 5.56%
  6. Gold Fields Ltd (GFI): 4.68%
  7. Impala Platinum Holdings (IMP): 4.11%
  8. Firstrand Limited (FSR): 2.68%
  9. Shoprite Holdings Limited2 (SHP): 2.64%
  10. Sanlam Limited (SLM): 2.54%

#5: Van Eck Africa ETF (AFK)

 

AFK follows the Dow Jones Africa Titans 50 index which consists of companies either based in Africa or earning a majority of their revenues there. The fund was launched in July 2008. The expense ratio is .78%. AUM equal $65 million and average daily trading volume is 16K shares. (This compares with July 2011 AUM of $98 million and average daily trading volume is 23K shares.) As of early January 2012 the annual dividend yield was 3.7% and YTD of 2.50%%

Here too the "Arab Spring" and investor avoidance of riskier sectors in the second half of 2011 had a negative impact on results causing significant volatility.

Data as of First Quarter 2012

AFK Top Ten Holdings & Weightings
  1. Tullow Oil PLC (TLW): 7.42%
  2. Nigerian Breweries PLC: 7.01%
  3. Attijariwafa bank (BCMA): 5.32%
  4. Orascom Construction Industries: 4.95%
  5. Maroc Telecom (IAM): 4.55%
  6. Guaranty Trust Bank PLC GDR (GRTB): 4.20%
  7. Old Mutual PLC (OML): 3.95%
  8. Randgold Resources, Ltd. ADR (GOLD): 3.71%
  9. Zenith Bank PLC: 3.66%
  10. Sasol, Ltd. (SOL): 3.65%

#6: SPDR Middle East & Africa ETF (GAF)

GAF follows the S&P Mid-East and Africa BMI Index which is a market capitalization weighted index of investable universe of publicly traded companies in the region. The fund was launched in March 2007. The expense ratio is .59%. AUM equal $95 million and average daily trading volume is 8K shares. (As of July 2011 AUM was $140 million and average daily trading volume of less than 10K shares.) As of early January 2012 the annual dividend yield was 3.46% and YTD return 1.4%.

Poor performance has much to do with the "Arab Spring" causing market disruption throughout the Middle East in particular. Another important feature is the overwhelming weight in South Africa (90%) vs the more balanced approach compared to AFK you might just as well own EZA.

Data as of First Quarter 2012

GAF Top Ten Holdings & Weightings
  1. Mtn Group Limited (MTNOF): 8.63%
  2. Sasol, Ltd. (SOL): 7.02%
  3. Naspers, Ltd. (NPN): 5.62%
  4. AngloGold Ashanti Limited (AULGF): 4.92%
  5. Standard Bank Group Ltd. (SBK): 3.70%
  6. Gold Fields Limited (GFI): 3.60%
  7. Impala Platinum Holdings (IMP): 3.20%
  8. Firstrand Limited (FSR): 3.04%
  9. Shoprite Holdings Limited2 (SHP): 2.47%
  10. Remgro, Ltd. (REM): 1.74%

#7: Van Eck Gulf States ETF (MES)

MES follows the Dow Jones GCC Titans 40 Index which consists of publicly traded companies belonging to the Gulf Cooperation Council. The fund was launched in July 2008. The expense ratio is .99%. AUM equal $14 million and average daily trading volume is 5K shares. As of early January 2012 the annual dividend yield was 4.01% and YTD return -.56%.

Investors believing they're investing in oil would be highly mistaken since most of the constituents are financial companies which only benefit indirectly from oil wealth. Oil is controlled by the government or ruling monarchs.

Data as of First Quarter 2012

MES Top Ten Holdings & Weightings
  1. Qatar National Bank: 8.37%
  2. National Bank of Kuwait: 8.31%
  3. Kuwait Finance House: 8.00%
  4. Mobile Telecommunication Co: 7.25%
  5. Masraf Al-Rayan: 5.04%
  6. Emaar Properties: 4.29%
  7. National Bank of Abu Dhabi: 3.98%
  8. DP World Ltd (DPW): 3.80%
  9. Ahli United Bank BSC: 3.73%
  10. The Gulf Bank: 3.70%

#8: WisdomTree Gulf Dividend ETF (GULF)

GULF (Wisdom Tree Gulf Dividend ETF) The index is a fundamentally weighted index that measures the performance of companies in the Middle East region that pay regular cash dividends on shares of common stock and that meet specified requirements as of the index measurement date. Companies eligible for inclusion in the Index must be incorporated in and have their shares listed on a major stock exchange in Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar or the United Arab Emirates. The fund was launched in July 2008. The expense ratio is .88%. AUM equal $15 million and average daily trading volume is 6K shares. As of early January 2012 the annual dividend yield is 6.82% (which may not be realized going forward) and YTD return -.82%.

Data as of First Quarter 2012

GULF Top Ten Holdings & Weightings
  1. Mobile Telecommunication Co: 14.05%
  2. Maroc Telecom (IAM): 10.00%
  3. Industries Of Qatar: 7.89%
  4. Qatar National Bank: 5.23%
  5. National Bank of Kuwait: 4.45%
  6. Oman Telecommunications Co: 4.26%
  7. Commercial Bank of Qatar: 4.21%
  8. Qatar Telecom: 3.93%
  9. National Bank of Abu Dhabi: 3.69%
  10. First Gulf Bank: 3.17%

#9: Van Eck Egypt ETF (EGPT)

EGPT (Van Eck Egypt ETF) follows the Market Vectors Egypt Index which consists of companies listed on an exchange in Egypt or that generate 50% of their revenues from the country. The fund was launched in February 2010. The expense ratio is .94%. AUM equal $36 million and average daily trading volume is 38K shares. (AUM in July 2011 after the revolution was $66 million and average daily trading volume is 65K shares. So it's still in decline from that aspect.)  As of early January 2012 the annual dividend yield was 3.00% and YTD return 4.60%.

Obviously, EGPT was one of the first casualties of the "Arab Spring" and continues to suffer as the country's future remains uncertain.

Data as of First Quarter 2012

EGPT Top Ten Holdings & Weightings

  1. Orascom Construction Industries SAE GDR (ORSD): 8.39%
  2. Commercial International Bank Ltd: 8.18%
  3. Orascom Telecom Holding SAE GDR (OTLD): 7.78%
  4. Telecom Egypt: 6.99%
  5. Egypt-Kuwait Hldg Co: 6.34%
  6. Talaat Mostafa Group (TMG): 6.07%
  7. Egyptian Company For Mobile Communications: 5.28%
  8. Efg-Hermes, Cairo: 4.85%
  9. Centamin Egypt Limited (CELTF): 4.76%
  10. TransGlobe Energy Corporation (TGA): 4.23%

#10: Van Eck Russian Small-Cap ETF (RSXJ)

RSXJ (Van Eck Russian Small Cap ETF) follows the Market Vectors Russia Small-Cap Index
which is a rules-based, modified market capitalization-weighted, float adjusted index comprised of publicly traded companies that are domiciled and primarily listed in Russia or that generate the majority of their revenues in Russia. The fund was launched in April 2011. The expense ratio is .67%. AUM equal $4 million and average daily trading volume is around 4K shares. As of early January 2012 the annual dividend yield is .43% and YTD return 3.45%.  

Van Eck is a well-heeled firm but that wouldn't necessarily prevent any firm from closing a fund that is a poor business venture. I doubt this would happen since the only product they could roll the fund's assets into may be RSX. This is just a note of caution based on the low AUM currently.

Data as of First Quarter 2012

RSXJ Top Ten Holdings & Weightings
  1. Transneft' AK OAO: 10.78%
  2. Alliance Oil Company Ltd. (AOIL SDB): 7.77%
  3. OJSC Pharmstandard GDR (PHST): 6.31%
  4. OJSC LSR Group GDR (LSRG): 4.95%
  5. Globaltrans Investment PLC GDR (GLTR): 4.84%
  6. Ogk-2: 4.09%
  7. VSMPO-AVISMA Corp: 4.08%
  8. PJSC Novorossiysk Comm Sea Port GDR (NCSP): 3.95%
  9. Petropavlovsk PLC (POG): 3.95%
  10. CTC Media, Inc. (CTCM): 3.66%

This is an eclectic assortment of ETFs that hold investor interest and at least some curiosity. Individually the ETFs within this category needed a logical home and this collection seems logical enough.

In Africa and MENA (Middle East and North Africa) the so-called "Arab Spring" has dominated conditions and markets. This event may last for many years. This uncertainty roils markets and rubs off on others within the region like Turkey and AFK for example.

Russia has no logical partner but like South Africa is resource rich and dominated by the activity in related commodity markets. Both can exhibit great volatility and investors may not be rewarded by a casual attitude with them. This is why our technical views are more important.  

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New issues may or may not be in the works. Any new issues (RSXJ for example) would need some seasoning to gain a higher ranking from our view.

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has no current positions in the featured ETFs.

(Source for data is from ETF sponsors and various ETF data providers)
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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