Frontier market ETFs, some of the hottest instruments in ETF Land, have taken a big hit on the violence in Tunisia and Egypt. Frontier markets are the markets too small to be considered emerging markets. They’re still tiny economies with markets that are highly risky and not very transparent. One of the biggest risks is political risk. Of course, most of these are in Africa.
On the heels of the overthrow of the Tunisian government last week, Egypt is now in turmoil. The Egyptian military have been ordered into the streets to help the police after a day of violent protest against President, and accused dictator, Hosni Mubarak. Fighting continues on the streets of Cairo, despite a nationwide curfew. The New York Times reports “the ruling party’s building was in flames at nightfall.” The tensions moved around the Arab world as protestors took to the streets of Yemen.
Egypt’s stock market fell 10% on Thursday and was closed Friday for the sabbath day, according to Jon Ogg at 24/7 Wall Street. The pure play Market Vectors Egypt Index ETF (EGPT) tumbled 14% this week. Of course, it’s a tiny fund, with just $8.5 million in assets under management. Liquidity might be a problem in this fund as Friday’s volume was 938,000 shares trading hands vs. average daily volume of 28,211. Meanwhile, with 21% of its portfolio in Egypt as of September 30, the Market Vectors Africa Index ETF (AFK), is down 8.5% this week to $32.27.