Exchange Traded Funds (ETFs) In The Middle East

CONTENTS OF BLOG POST

Have you ever wondered exactly what Exchange Traded Funds are?

Exchange Traded Funds are the easiest way for a foreign investor to invest in the Middle Eastern region. Exchange Traded Funds (ETFs) are a type of investment fund which is a basket of securities that tracks an underlying index.

So what are Securities?

A “security” is a fungible and tradable financial instrument that is used to raise capital for private or public markets. The three main types of securities include equity, debt, and a combination of both equity and debt. Securities represent ownership positions in publicly-traded corporations in the form of stock. They can also represent a creditor relationship with a governmental body or corporation in the form of owning that organization’s bond. There is also something called an option which is a ‘right to ownership’ of a bond.

What is an index?

An index is a theoretical portfolio of investments that represent a section of the financial market. The index value is derived from calculating those underlying investments. There are various ways that these indexes can be calculated, such as market-cap weighting, revenue-weighting, float-weighting, and fundamental-weighting. These various types of weighting are ways to reduce the impact of an individual component of the index. You can’t trade an index like you can with stocks for instance, which is why they are theoretical. An index is used by investors to measure the market’s movements, or as a guide when creating an index fund.

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What is an index fund and how does it differ from an index?

Institutional fund managers use the indexes to create index funds so that individual investors can invest in a diversified portfolio of investments. An individual investor would otherwise be required to invest in the individual elements of an index by buying each of the individual holdings within an index, which would be cost-prohibitive. The index fund that is created by these institutional fund managers is offered to individual investors so they can take advantage of the low cost of entry into a comprehensive and diversified portfolio of investments, allowing them to target a particular section of the financial market.

What is the difference between an index fund and an Exchange Traded Fund(ETF)?

Now that we understand the differences between all of the above financial instruments and how they work in combination with each other, let’s look at the difference between an Exchange Traded Fund(ETF) and an Index fund. An index fund can only be bought and sold at the end of a trading day at whatever the price is at that time. An Exchange Traded Fund(ETF), however, can be traded on an exchange at any time of the day during trading hours, and at whatever price the ETF is at the time you decide to trade it.

What types of Exchange Traded Funds(ETFs) are available in the Middle East?

Now we’ll take a look at what Exchange Traded Funds are available in the Middle East. Let’s take a look at 9 ETFs in the table below.

ETFTickerMgr/advisorAsset ClassRegionCountryInceptionTracking Index
iShares MSCI Israel Capped
Index Fund
EISiSharesEquities – EMMiddle EastIsrael2008/03/26MSCI Israel Capped
Investable Market Index
iShares MSCI Qatar Capped
ETF
QATiSharesEquities – EMMiddle EastQatar2014/04/29MSCI All Qatar Capped Index
iShares MSCI Turkey
Investable Market Index Fund
TURiSharesEquities – EMMiddle EastTurkey2008/03/26MSCI Turkey
Investable Market Index
iShares MSCI UAE Capped
ETF
UAEiSharesEquities – EMMiddle EastUAE2014/04/29MSCI All UAE Capped Index
Market Vectors Egypt Index
Fund
EGPTVan EckEquities – EMMiddle East / AfricaEgypt2010/02/16Market Vectors Egypt Index
Market Vectors Gulf StatesMESVan EckEquities – EMMiddle EastMultiple2008/07/22Dow Jones GCC
Titans 40 Index
Market Vectors IsraelISRAVan EckEquities – EMMiddle East / AfricaIsrael2013/06/26BlueStar Israel Global Index
SPDR S&P Emerging Middle
East & Africa ETF
GAFState Street SPDREquities – EMMiddle EastMultiple2007/03/19S&P Mid-East
and Africa BMI Index
WisdomTree Middle East
Dividend Fund
GULFWisdomTreeEquities – EMMiddle EastMultiple2008/07/16WisdomTree
Middle East Dividend Index
This table is not a comprehensive list and certainly not investment advice. You should always do thorough research before investing in anything. This table of ETFs just gives you an overview of what is available in the Middle East. The table was accurate at the time of publishing and if you see any dead links, inaccurate information, or outdated information please feel free to let me know in the comments section – I welcome your feedback and will update as appropriate.

You could also just Invest in specific countries in the Middle East

ETFs offer investors the opportunity to diversify their Middle East equities by buying shares in countries such as Saudi Arabia, Egypt, Bahrain, Kuwait, Qatar, Oman, and Bahrain. Investors seeking less diversified exposure to the Middle East market can invest directly in specific countries. Investing in individual countries can entail more risk, whereas ETFs allow investors to choose specific opportunities by investing in a number of countries in the region. I’m not here to recommend, advise, or otherwise influence how you decide to invest. I am simply pointing out the opportunities available to you.

If you are interested in increasing your exposure to the Middle East markets, you might want to consider investing directly in a particular country. Much has been said about increasing trade between the Middle East and the US, and superpowers like China and the US are now eyeing the region’s lucrative markets. Even in the era of falling oil prices, the Saudi stock market is still dominated by oil and gas companies like Saudi Aramco, the world’s largest oil producer. If you have deep pockets and are not adverse to risk you could look at the futures markets in these individual Middle Eastern Countries.

Summary

In conclusion, the Middle East is becoming a major player for overseas investment opportunities, and this trend looks set to continue in the short and long-term horizons. There are ample reasons to start setting your sites on these investment opportunities and Exchange Traded Funds (ETFs) are a cost-effective and diversified approach to achieving this goal.

Are you interested in diversifying your investment portfolio?

What do you think about these opportunities in the Middle Eastern financial markets? Please leave your comments below.

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