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.