Single Country Middle East & Africa ETFs and Closed-End Funds

by: SA Editors May 28, 2008 | about stocks: EIS / EZA / ISL / JNB / TAV / TKF / TUR    
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Single Country Middle East & Africa ETFs and Closed-End Funds List
(click on symbol for data and articles)

 

Israel ETFs
iShares MSCI Israel Capped Investable Market Index Fund ETF (EIS)
NETS TA-25 Index Fund (TAV)

Israel CEFs
First Israel Fund (ISL)

South Africa ETFs
Shares MSCI South Africa Index Fund (EZA)
NETS FTSE/JSE Top 40 Index Fund (JNB)

Turkey ETFs
iShares MSCI Turkey Investable Market Index Fund ETF (TUR)

Turkey Closed-End Funds
Turkish Investment Fund (TKF)

 

What Are They?

  • Single country funds -- ETFs (exchange-traded funds), ETNs (exchange-traded notes) and CEFs (closed-end funds) -- provide investors with exposure to foreign stocks on a country by country basis, in contrast to broad and regional funds which cover multiple countries' stocks in a single ETF.
  • Single country ETFs and CEFs usually provide exposure to foreign stocks that don't trade on US exchanges, though sometimes they are limited to stocks that trade in the US as ADRs (American Depository Receipts).
  • ETFs and ETNs are typically index funds which trade close to or at their underlying asset value. In contrast, closed-end funds tend to be actively managed, and due to their structure can trade at significant premia or discounts to their net asset values.

Why & How To Use Them

  • If you're a long term investor looking to build a diversified portfolio that includes foreign stocks, you'll need to decide whether to use a few broad foreign stock ETFs or a collection of single country ETFs and closed-end funds. Broader funds tend to be cheaper and easier to manage. Since ETFs are usually market cap weighted, a broad or regional foreign stock ETF will provide exposure to countries proportionate to the size of their stock markets. In contrast, single country funds allow you to overweight countries that you believe will perform better.
  • If you decide on single country funds, you'll need to chose between using an ETF or a CEF for any given country. ETFs (exchange-traded funds) appeal to investors looking for maximum diversification, low cost and an indexing approach. CEFs (closed-end funds) offer opportunities to investors looking for a more active approach to management. We've grouped the ETFs and CEFs together by country below, so you can see the choice of ETFs and CEFs for each country.
  • Closed-end funds may be attractive when they trade at discounts to net asset value, despite their higher expense ratios and more limited holdings. For more on this important issue, see Further Reading below.

What to Look Out For

  • Compared to broad or regional foreign stock ETFs, single country ETFs tend to have higher expense ratios, have been criticised for wide tracking error (divergence from their underlying indexes), and may suffer from wider bid-ask spreads.
  • Closed-end funds tend to have higher expense ratios than ETFs, and may be more expensive to purchase and sell as their lower trading volume may result in wider bid-ask spreads.
  • Closed-end funds are a specialty. A CEF may look attractive if it trades at a discount to net asset value, but discounts may persist for long periods of time, and higher expenses and poor active management might lead to underperformance. See Further Reading below for more on investing in CEFs.

Further Reading

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.

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This article has 6 comments:

  •  
    Jun 25 05:16 AM
    What about all the other countries? I'm just itching to buy ETFs for Iraq and Uganda.
    :-)
    Reply | Link to Comment
  •  
    Jun 25 05:19 AM
    Does anyone have any opinions on ISL? Is it well managed? Fees?

    There really should be an Israel index ETF, because there are a lot of Israeli publicly traded companies on the NASDAQ and locally. Why hasn't someone issued this one?
    Reply | Link to Comment
  •  
    Mar 30 04:33 PM
    Update: we just added the new Barclay's iShares Israel and Turkey ETFs to this list.
    Reply | Link to Comment
  •  
    May 28 12:59 PM
    Currently there is very disappointing ETF representation of Middle East & African countries in the ETF product line-up. I wouldn't waste my time making these products fit your portfolio when a vastly superior mutual fund already exists: T. Rowe Price Africa & Middle East Fund (TRAMX).

    TRAMX Country Exposure:
    U.A.E. (United Arab Emirates) 24.6%
    Egypt 17.9%
    Qatar 16.6%
    Oman 12.9%
    South Africa 10.8%
    Jordan 4.5%
    Bahrain 3.2%
    Lebanon 2.7%
    Nigeria 0.5%

    I've been in this fund since early Oct. '07 and have been pleased to see my position go from $11 to $14.....a 27% gain through the current downturn. Check and compare charts and you'll see that even the on-fire iShares Brazil ETF (EWZ) has a 22% gain over the same period

    This is a long-term prospect so I don't feel having the flexibility of an ETF was worth staying away from this investment. Until there exists a comparable line-up of Middle East ETFs, TRAMX is the way to go.
    Reply | Link to Comment
  •  
    May 28 01:08 PM
    On another note, the author says, "Many Middle Eastern economies are dominated by oil. For exposure to the Middle East, it may therefore make sense to consider the oil ETFs."

    Interestingly, while the PowerShares DB OIl ETF (DBO) has gained ~11.5% over the last month, TRAMX has traded at ~$14/share, or ~ 0% gain. So, an investment in oil is just that, it does not acurately correlate with Middle Eastern equities markets as the author suggests.
    Reply | Link to Comment
  •  
    May 29 04:37 PM
    On May 15, Fidelity began offering a frontier market fund, EMEA under the symbol FEMEX.
    Reply | Link to Comment
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