From the August 2008 issue of Research Magazine • Subscribe!

August 1, 2008

Van Eck Targets Mideast

When it rains, it pours. And lately, it's been pouring Middle East-focused exchange-traded funds (ETFs). Van Eck Global is the latest provider to introduce an ETF focused on stocks from the Gulf region.

The company has launched the Market Vectors-Gulf States Index ETF (MES) on the NYSE Arca. The fund is linked to the Dow Jones GCC Titans 40 Index and charges annual expenses of 0.98 percent.

The index is broken down among a number of different sectors; the largest include banks (38.5 percent), financial services (21.6 percent), real estate (10.5 percent), technology (7.6 percent), construction and materials (7.2 percent), industrial goods and services (7.1 percent) and telecommunications (3.6 percent).

Companies within the index are either headquartered in countries belonging to the Gulf Cooperation Council (GCC) or generate the majority of their revenues in countries belonging to the GCC.

By design, the Dow Jones GCC Titans 40 Index restricts the weight of individual stocks at 8 percent in each country, with a maximum of 15 companies per country. Stocks within the index are rebalanced quarterly.

As of mid-July the country allocations were: Kuwait (52.3 percent), United Arab Emirates (25.8 percent), Qatar (14.9 percent), Oman (4.4 percent) and Bahrain (2.6 percent).

Even though Saudia Arabia is one of the Gulf region's economic juggernauts, it's omitted because of restrictions on foreign investments.

Top holdings inside MES include Emaar Properties, National Bank of Kuwait, and National Industries Group.

Other ETFs that offer exposure to Middle East stocks are the WisdomTree Middle East Dividend Fund (GULF) and the PowerShares Frontier Portfolio (PMNA).

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Ron DeLegge is the San Diego-based editor of www.etfguide.com.

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