As investors with access to global markets, it is easy to become stuck in the headlines major markets such as the developed United States and Europe as well as the emerging segments of Brazil, China and India and South africa. While these markets remain vital, investors risk missing out of under-researched and under-owned asset that exist globally. One area is the Frontier Markets arena where there is potentially opportunities to earn higher returns over the long term.
What is a Frontier Market?
A frontier market is a type of developing country which is more developed than the least developing countries, but too small to be generally considered an emerging market.
One such example is Egypt, one of Africa’s largest economies where the major drivers include exports of natural gas, and non-petroleum products such as ready-made clothes, cotton textiles, medical and petrochemical products, citrus fruits, rice and dried onion, and more recently cement, steel, and ceramics.
Gross Domestic Product (GDP) has, over the last eight quarters, increased, while the 5-year quarter-on-quarter unemployment trend has seen the percentage decline from over 13% to just above 10.5%.
Investors wishing to gain exposure to Egypt could have a look at the VanEck Vectors Egypt ETF – an instrument which offers access to the broader Egyptian market.
Below, I highlight the Top 10 ETF holdings followed by the sector ETF weightings:
Country and Sector Weightings
Technical View: Egyptian equities have under-performed the global equities over the last number of years, with it’s most recent peak in September 2014. Since 2015, the ETF has formed a base, developing an inverse head and shoulder pattern. At current levels we are seeing a short term bullish reversal with the “right shoulder” starting to develop as per the weekly chart view.
At around current levels ($34.50/35.50) I believe that investors have the opportunity to accumulate the ETF as an addition to a long term portfolio, placing a stop-loss at $31.00.
If you are interested in getting to exposure to the broader Africa theme, the VanEck Africa ETF (AFK) is also available.