CAIRO: Investments tied to Egypt rebounded in less volatile trading on Friday as a tumultuous week ended without a resolution to the civil unrest gripping the country.
Egypt’s stock market, which has been closed since January 27, is expected to reopen Monday and could have an impact on the prices of exchange-traded funds tied to the country. Some managers expect substantial gyrations in shares.
The Van Eck Market Vectors Egypt Index exchange-traded fund (EGPT.P) rose 0.4 percent. The fund is one of the few instruments available to trade the Egyptian market. The market is down 12 percent over the past three weeks.
Van Eck on Monday suspended new share creation in the fund, with the Egyptian market remaining closed. ETFs create new shares in response to demand through additional purchases of the underlying components. More than $10 million in funds have been poured into the Van Eck ETF that have not been invested, according to Thomson Reuters equities analyst John Kozey.
Other ETFs with exposure to Egypt rallied Friday. The Market Vectors Africa Index was up 1.2 percent, while the MENA Frontier Countries Portfolio gained 0.8 percent. Egypt accounts for 17 percent of each portfolio.
In a sign that uncertainty continues to be a headwind for the region, the Bank of New York Mellon index of leading Israeli ADRs fell 0.4 percent.
"There was a working relationship between Israel and Egypt, and that could deteriorate in a post-Mubarak era," said Scott Clemons, chief investment strategist for Brown Brothers Harriman in New York.
"There’s a question of preferring the devil you know to the one you don’t, so it wouldn’t surprise me that securities tied with Israel are still being hit."
US-traded shares of Israeli software firm Formula Systems fell 2.1 percent to $18.49. The stock is down 6 percent since January 14.
The 166 funds worldwide that invest in the Middle East and North Africa, including Egypt, represent approximately $13.4 billion of equity and bond assets under management in mutual funds and exchange traded funds. Worldwide mutual fund assets total $23.7 trillion, according to the Investment Company Institute in Washington.
