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Strategies & Market Trends : Guidance and Visibility -- Ignore unavailable to you. Want to Upgrade?

To: bumblin bob who wrote (176062)	7/22/2008 3:03:55 PM
From: hotlinktuna	Read Replies (1) \| Respond to of 208838

Decided to get 2 ETF's GULF 25.30 + PMNA 25.00 saw this: Seeking Alpha Middle East Proving To Be Hotspot for ETFs Wednesday July 16, 7:29 pm ET By Index Investor Index Investor submits: By Murray Coleman As oil prices keep rising, stock markets in the Middle East are soaring. Meanwhile, the broad U.S. stock market remains in negative territory. The result is a rush of sorts by exchange-traded fund sponsors to provide access to often-tiny yet fast-growing nations such as Morocco and Kuwait. On Wednesday, the WisdomTree Middle East Dividend Fund (NASDAQ: GULF) became the latest frontier-dominated ETF to launch. Just as significantly, perhaps, is that it's also the second such type of fund to choose the world's dominant oil-producing region as its focal point for investing. Although not listed as a pure frontier markets play, some 80% of GULF's stocks are from markets fitting that category. The other 20% represent larger—and relatively poorer performing—emerging markets constituents. "Our main concern was to bring investors access to the Middle East's stock markets," said Jeremy Schwartz, deputy research director at WisdomTree Asset Management. "It just so happens that a lot of the Middle Eastern countries are considered frontier markets." While much of the developed world is still slogging through recession-like conditions, so-called frontier markets in the Middle East are flying high. For example, Oman and Qatar are each up around 24% and Lebanon has gained 52% so far through Thursday, according to MSCI Indices. Even several bigger emerging markets in the Middle East are outperforming in U.S. dollar-weighted measures. Those include Morocco's 31.92% jump and Jordan's 16.52% increase. The region's laggards are even looking relatively better that most larger and more developed global markets. Egypt was down 4.58% and emerging markets as a whole had slid an average of 18.42%. "While the U.S. has been hurt by rising oil prices over the past three years, this region has been benefitting," said Schwartz. "The correlation between the U.S. and the Middle East is about the lowest in the world right now." Last week, the PowerShares MENA Frontier Countries Portfolio (NASDAQ: PMNA) hit the market. It's based on the NASDAQ OMX Middle East North Africa Index. And in mid-June, the Claymore/BNY Frontier Markets ETF (AMEX: FRN) launched. It takes a more global approach than the other two ETFs. Besides Egypt (17.63%) and Kuwait (3.03%), FRN doesn't include the other major six markets that GULF does. Other companies eligible for inclusion in WisdomTree's benchmark that guides its ETF are Bahrain, Jordan, Morocco, Oman, Qatar and the United Arab Emirates. As a result, a more direct competitor for pure Middle Eastern exposure is PMNA. It also targets the same eight markets in the Middle East as GULF. But it adds Lebanon and the emirates of Dubai and Abu Dhabi to its portfolio. The Invesco PowerShares fund also comes with a more expensive price tag, though. It's expected to wind up with an annual expense ratio of 0.95% vs. GULF's 0.88%. The two also differ in how their benchmarks are put together. PMNA uses a straight market-cap sizing methodology, although it modifies those weights a bit by putting a cap of 10 stocks from any one country being included at a time. Currently, it holds about 56 different names. GULF starts out by screening for the 100 largest companies by market-cap size in its eight country investment horizon. But it weights each by dividend yield. And if any single country grows to more than a third of the benchmark, it'll automatically rebalance each year back to no more than 25% of the total weighting. The dividend yield on GULF now is running at 5.38%, more than double what the S&P 500 is paying, points out Schwartz. "If you're an investor interested in that region, you might not trust the accounting standards of these countries. But you at least you'll know these companies are strong enough to pay dividends." WisdomTree's emphasis on dividends also can help serve as a cushion in such tiny and often volatile markets, he adds. "We find that a fundamentally weighted methodology works best in markets where stock prices tend to rise much more quickly than their underlying fundamentals," Schwartz said." In a market like the Middle East with companies that tend be smaller than even emerging markets, you've got to worry about hot money chasing fast-rising stocks." Country weightings also vary between the two ETFs. Egypt tops PMNA at 20.18% while it only represents 11.93% in GULF (see chart below). And sector weightings are also quite different between the two. So are market-cap allocations between the two portfolios and top components. But the biggest similarity could be the key reason why investors find both attractive new alternatives for their portfolios. Each sports a bond-like correlation to U.S. stocks. In the case of GULF's index, it's around 0.22 over the past three years. To put that into perspective, the MSCI Emerging Markets Index has a correlation more than three times that level. Correlation numbers, of course, measure how closely different indexes or funds move in unison. The closer to 1.0, the more related their performances are likely to be through different markets over time. Just 500 of each but sounded good imho...tuna