InvescoPowerShares has introduced a new exchange-traded fund (ETF) that will track frontier markets in the Middle East.

The PowerShares MENA Frontier Countries Portfolio (PMNA) will follow the Nasdaq OMX Middle East North Africa Index.

Frontier markets generally cover the least developed countries within emerging market economies. The stocks from these tiny nations are subject to a range of unique risks including political instability, hyperinflation and natural disasters, along with food and power shortages.

Countries represented inside PMNA include Abu Dhabi, Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and the United Arab Emirates. The stock index is float-adjusted market-capitalization weighted.

Top holdings in the fund are Arab Bank, Emaar Properties and National Industries Group S.A.K. Regarding country weightings, Egypt, Kuwait and Jordan represent just over 50 percent of the fund.

Interestingly, energy stocks account for less than 2 percent of the fund’s sector representation. Financials (55.01 percent), telecommunications (19.01 percent), and industrials (12.48 percent) have the largest weightings. According to the prospectus, the fund’s annual expense ratio is 0.95 percent.

Frontier countries historically have demonstrated a low correlation to other asset classes. Through the second quarter of 2008, MENA frontier countries had a 3-year correlation of just 0.19 compared with traditional emerging markets.

“The Nasdaq OMX Middle East North Africa Index enables investors to track companies in a region that has experienced robust economic growth and strong job creation in recent years,” said Nasdaq OMX Executive Vice President John Jacobs. “This index provides investors with a benchmark for a region that is actively implementing structural changes to promote continued economic growth and investment.”

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