By Mike Caggeso
Several Middle East markets are expected to launch exchange-traded funds (ETFs) this year, according to a senior official at Morgan Stanley (MS), opening the door to the region's very lucrative, fast-growing economies.
"Most exchanges in the region would like ETFs, even Saudi Arabia. The region sees ETFs as an appealing product for the [Gulf Cooperation Council] investor as well as other investors in the region," Deborah Fuhr, Morgan Stanley's managing director of investment strategies, told the United Arab Emirates' Khaleej Times.
Fuhr said exchanges in Oman, Saudi Arabia and Egypt are likely to be the first to offer ETFs. There is also interest from the Dubai International Financial Exchange (DIFX) and the Abu Dhabi Securities Market (ADSM), she said.
The simplicity of ETFs – which are index-tracking funds that can be bought and sold like stocks – are an ideal method for tapping the economies of overseas markets. Many times, the ETFs represent an individual country's main index or a basket of related stocks, such as agriculture or commodities.
The first ETF launched in 1993 and since then their popularity has only grown. There are currently 1,173 ETFs listed on exchanges in the United States, Latin America, Europe, Asia, Australia and South Africa, according to Business 24/7.
Tapping Oil-backed Economies
Once the Middle East region does offer ETFs, there's little doubt a barrage of institutions, sovereign wealth funds and individual investors will flock to them.
Not only are the funds attractive because Middle East exchanges are soaring right now, but also because many of these economies are built and sustained by the region's oil wealth. And they'll fare even better in the future, as oil is expected to peak as high as $187 this year.
That's certainly the case for Saudi Arabia, but the real gem of this group is the UAE, where sovereign wealth funds are slowly releasing highly valued holdings onto local indices.
Last November, Dubai Ports World, a state-run holding company, set a regional record for the biggest initial public offering (IPO) by raising $5 billion. Its success will no doubt prompt other UAE governments to launch more public share sales.
The boom in Middle East investors looking to sink their petro-dollars into more long-term investments has made many Western investors envious of these opportunities, especially as the U.S. economy closes in on a possible recession.
News and Related Story Links:
Gulf Cooperation Council
- Kahleej Times Online:
ETFs likely to be listed in the Middle East this year
Exchange Traded Fund
- Business 24/7:
ETFs to debut in Mideast 'this year'
- Money Morning:
Dubai Ports World's Record IPO
- Gulf News:
DP World's offering could trigger more IPOs