Van Eck Launches Gulf States Index ETF

The new Market Vectors Gulf States Index ETF (MES) launched on July 23rd, the most recent region specific ETF to hit the market. The Gulf States fund is based on the Dow Jones GCC Titans 40 Index, which is comprised of public companies that are headquartered in countries that belong to the Gulf Cooperation Council (GCC) or that generate most of their revenues from countries belonging to the council. In addition to being part of the GCC, companies in the index must have market caps greater than $100 million, a 3-month average daily turnover of $1 million, and trade on recognized stock exchanges. MES is country heavy in Kuwait (52%), the United Arab Emirates (26%), Qatar (15%), and Oman (4%).

The Gulf States Index ETF is the most recent of a slew of Middle East, Africa, and frontier market ETFs to become available. PowerShares recently launched a similar, but more diverse MENA Frontier Countries Portfolio ETF (PMNA) which also has top country exposure in Kuwait, and exposure in Qatar, the United Arab Emirates, and Oman. Other similar ETFs include State Street’s Emerging Middle East and Africa Fund (GAF), Market Vectors Africa Index Fund (AFK), and Claymore’s Frontier Markets ETF (FRN).

The top 10 holdings in the Gulf States Index ETF are:

Mobile Telecommunications Co. – 12.14%
Kuwait Finance House – 10.45%
National Bank of Kuwait – 7.92%
Emaar Properties – 7.21%
National Industries Group – 5.43%
Qatar National Bank – 3.28%
Public Warehousing Co. – 2.87%
Global Investment House – 2.83%
First Gulf Bank – 2.65%
Commercial Bank of Kuwait – 2.63%

The fund has a heavy weighting in banks (38%), followed financial services (22%), and real estate (11%). The expense ratio for the fund is 0.98%, and trades on the NYSE Arca exchange.

USO Breaks its Upward Trendline...Finally

The moment that many investors, and all consumers have been waiting for has finally come, the possibility that oil could finally be topping out. Today the United States Oil ETF (USO) broke its upward trendline that was set back in February. In order to hold the February trend, USO would have needed to hold the $110 mark. Whether or not this will lead to a significant drop in oil, or a sideways trading range remains to be seen. Either way, the break of this trend puts significant doubt in investors and traders that the rally in oil can continue.

The best way to play a potential drop in oil is the MacroShares $100 Oil Down ETF (DOY), which tracks the inverse price of crude.

The First Middle East Frontier ETF

The eagerly awaited PowerShares MENA Frontier Countries ETF (PMNA) launched on July 9th, the second frontier ETF to hit the market. Claymore’s Frontier Markets ETF (FRN) started trading in June. Although both funds lay claim to the “frontier” market, the two couldn’t be any more different in their holdings. PowerShares’ fund is based on the NASDAQ OMX Middle East North Africa Index, whereas Claymore’s fund tracks the Bank of New York Mellon New Frontier DR Index. PMNA is country heavy in Egypt and Kuwait, and FRN is heavy in Poland and Chile.

PowerShares describes the index that PMNA is tracking in more detail on their website: “The Index seeks to provide direct exposure to liquid stocks of companies that have the majority of their assets or services residing in MENA frontier market countries, which include Kuwait, Bahrain, Qatar, the United Arab Emirates, Oman, Lebanon, Egypt, Jordan and Morocco.” The largest holding in the fund is Arab Bank PLC, which accounts for roughly 10% of the funds assets. In terms of sector allocation, the fund is 55% financials, 19% telecom, 13% industrials, 10% materials, and the remainder in energy and utilities. The current top ten holdings in the fund are as follows:

Arab Bank PLC – 10.08%
Emaar Properties – 7.71%
Nat’l Ind. Grp S.A.K. – 5.91%
Mobile Tele. Co. K.S.C. – 5.44%
Orascom Constr. Ind S.A.E. - 5.10%
Orascom Telecom Holding – 4.94%
Ban. Marocaine du Comm. – 4.69%
Maroc Telecom – 3.91%
Kuwait Fin. House K.S.C. – 3.65%
Solidere GDR Reg S – 3.49%

On a fundamental basis, the trailing P/E ratio for the fund is 14, and price to book is around 2.7 for the 50 issues that make up the fund. The expense ratio for the fund is 0.95%, and trades on the NASDAQ market.

Tracking Oil with Treasuries: The New Face of Oil ETFs

MacroMarkets new paired oil ETFs launched last week, replacing the previous oil ETFs (UCR and DCR) that were liquidated in June after reaching their termination triggers. Unlike the popular United States Oil (USO), these paired ETFs hold cash instruments and transfer funds between each other, instead of holding oil futures contracts. The paired ETFs will track the price of crude on the NYMEX, and will transfer funds dollar-for-dollar with the price of crude. The securities will use a “reference price” of $100 crude, and the funds NAV at inception is one quarter of the reference price. The funds have a 95 basis point expense, for essentially holding cash.

This structure is unique because the Oil up (UOY) and Oil Down (DOY) will have no impact on the oil market. With the United States Oil ETF, the fund must roll into the futures of the upcoming month, and sell off futures of the expiring month to avoid delivery of crude. Sam Masucci, the CEO of MacroMarkets says “We’re not increasing the trading volume in futures, we’re not storing barrels of oil, we have a passive involvement in the oil market. We’re not affecting the price of oil”. These new offerings will have a liquidation price when oil closes above $185 for three consecutive days.

This unique structure is patented by the company, and is not the only fund they will be offering with this structure. The company has filed with the SEC for paired up and down real estate ETFs, which will track the S&P/Case-Shiller Composite-10 Home Price Index, with a 2x leverage factor. For more detailed information on the paired ETF methodology, visit MacroMarkets website.

Second Quarter ETF Update: Winners & Losers

Another quarter has come and gone, the dust has settled, and now its time to see who made our top ten best and worst ETFs year to date. To avoid duplication, we’ve eliminated the lesser known ETFs that essentially track the same assets as the more popular issues, as well as funds with built in leverage.

As you can probably imagine, the top ten list was saturated with energy and commodity related names. The best overall performer was the United States Natural Gas Fund (UNG) which is now up over 75% for the year. Rounding out the bottom of the top performers was the iPath DJ AIG Copper ETN (JJC) which is up almost 29% for the year.

Best Performers Year to Date:
1) 75.1% - United States Natural Gas AMEX:UNG
2) 56.1% - PowerShares DB Energy AMEX:DBE
3) 51.0% - United States Oil AMEX:USO
4) 44.3% - PowerShares DB Commodity Index Tracking Fund AMEX:DBC
5) 42.1% - iShares S&P GSCI Commodity-Indexed Trust NYSE:GSG
6) 36.5% - SPDR S&P Oil & Gas Exploration & Prod AMEX:XOP
7) 34.1% - SPDR S&P Metals & Mining AMEX:XME
8) 31.5% - iShares Dow Jones US Oil & Gas Ex Index NYSE:IEO
9) 29.3% - ELEMENTS Rogers Intl Commodity ETN AMEX:RJI
10) 28.9% - iPath DJ AIG Copper TR Sub-Idx ETN NYSE:JJC

This year’s dogs are a different story, and surprisingly quite a diverse group. The worst performer, was the iPath MSCI India Index ETN (INP) which is sporting a solid -47% return year to date. Following close behind at -35% and -33% were the iShares DJ Broker-Dealers (IAI) and the KBW Capital Markets (KCE), respectively. Loaded with solar names, PowerShares WilderHill Clean Energy posted the 6th worst performance, followed by iShares DJ US Healthcare Provider, both losing roughly 30% this year. By far the most popular name on both lists, the Financial Select Sector SPDR (XLF) claimed the 8th spot on the worst list, losing a little over 29% of its value this year.


Worst Performers Year to Date
1) -47.4% - iPath MSCI India Index ETN NYSE:INP
2) -34.9% - iShares Dow Jones US Broker-Dealers NYSE:IAI
3) -32.8% - KBW Capital Markets ETF AMEX:KCE
4) -32.6% - Claymore/AlphaShares China Real Estate NYSE:TAO
5) -31.8% - PowerShares HighYield Dividend Achievers AMEX:PEY
6) -30.5% - PowerShares WilderHill Clean Energy AMEX:PBW
7) -29.7% - iShares Dow Jones US Healthcare Provider NYSE:IHF
8) -29.2% - Financial Select Sector SPDR AMEX:XLF
9) -29.1% - PowerShares Golden Dragon Halter USX China AMEX:PGJ
10) -28.5% - HealthShares Ophthalmology NYSE:HHZ

Our top ten best and worst lists were created using data pulled from Morningstar