Tag Archives: EGPT

ETF Companies Seek Vanity Plates for Tickers

Rachel Louise Ensign wrote a funny story in the Wall Street Journal on ETF sponsors searching for memorable ticker symbols to help market their funds. Laura Morrison of the New York Stock Exchange says they’re like vanity plates on cars. But with 1,350 symbols already in use on the NYSE Arca, the biggest exchange for ETFs, and another 2,446 reserved for future products, it’s getting hard to find something catchy.

Ensign likes the literal, such as SOIL, the ticker for the Global X Fertilizers/Potash ETF, the figurative, such as DUST for the Direxion Daily Gold Miners Bear 3X Shares and the alluring, such as GGGG for the Global X Pure Gold Miners ETF.

My all-time favorite is humor, with MOO, the symbol for Market Vectors Agribusiness ETF. For literal, it’s hard to beat EGPT for Market Vectors Egypt Index ETF or CORN for the Teucrium Corn Fund. For figurative I like GULF for WisdomTree’s Middle East Dividend Fund

The question on whether these vanity plates help a fund’s marketing efforts ends up with a big possibly considering the Global X Farming ETF, with the ticker BARN, gets ready to shut down this month.


The Dangers of Buying on Disasters

Charles Wallace wrote an intersting story for Daily Finance about the risks of buying ETFs on disaster news. He specifically looked at ETFs that focused on the Japanese and Egyptian equity markets.

Wallace quotes me in the article saying you shouldn’t put a lot of money into these kinds of ETFs and to make sure you’re diversified. However, a lot of my insights from our interview didn’t make it into the article, especially about the iShares MSCI Japan Index Fund (EWJ) and the main Egypt ETF, the Market Vectors Egypt Index (EGPT). Shares of Egyptian stocks, and hence the Egypt ETF were driven down by protests against President Hosni Mubarak.

Wallace wrote “Trading in the EGPT was brisk in the U.S., and the ETF moved consistently higher even though the stock market in Egypt was closed for more than a month. When the Egyptian Exchange reopened on Tuesday, stocks dropped 10% and EGPT opened at $15.86, a decline of 17% from its March 9 high.”

Anytime an ETF tracks a foreign country, especially one whose market is closed during U.S. trading hours, it can move on news that occurs after the foreign market closes. This typically puts the ETF’s price at a premium or discount to the underlying stocks in the portfolio. However, nearly every time, the movement of the ETF correctly predicts the movement of the local market when it finally opens the next day. So, these premiums or discounts last less than 24 hours. While there is some risk in these kinds of trades, the ETFs usually seem to be doing the price discovery for the closed local market.

However, when a market is closed like the Egyptian market was for a month, then the ETF begins to trade like a closed-end fund. That’s because the arbitrage mechanism that balances out the creation and redemption of the ETF’s shares is unable to work. At that point, the price discovery mechanism is dismantled and the ETF shares can trade dramatically far from the actual value of the underlying stocks in the portfolio. Without the arbs there to keep the share price closely linked to the underlying portfolio, it ceases to trade on fundamentals and becomes pure speculation.

Conclusion, if the ETF can no longer buy the underlying shares of the market it tracks, stay away. You are playing with fire and bound to get burned.

Egyptian Protests Sink Frontier ETFs.

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.