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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Investing: ETF Exposure in Emerging Middle Eastern Markets

Companies / Exchange Traded Funds Nov 19, 2017 - 05:57 PM GMT

By: Richard_Cox

Companies

Stock investors that are looking to take positions in emerging markets have started to look to the Middle East in growing numbers.  The United Arab Emirates (UAE) has proven to be one of the most stable economies in the region and, as a result, we have started to see more stock market selections offered through exchange traded funds.  One name to watch here is the iShares MSCI UAE Capped ETF (NASDAQ:UAE), which is showing some interesting chart activity as it attempts to break out of its recent trading ranges.  


The ETF is particularly interesting for UK investors, as the fund is split between a majority UAE assets (98%) and a minority UK assets (2%), so there is some regionality that enhances the likely stability that should be seen for those taking positions.  Central benefits in the ETF can be seen in the fact that it is broadly diversified through small-cap and large-cap exposure, and no single asset can comprise more than 25% of the holding at any given time.

Most of the exposure is devoted to telecom and real estate assets, as these two sectors comprise roughly 35% of the total holdings in the ETF.  These are asset groups that are relatively shielded from one another, and so declines in one of these areas should not materially impact the performance results for investors in Dubai looking to capitalize on alternative areas in the total holding.

From a chart perspective, we can see that the ETF has dropped back to discounted levels below 17.  Key resistance in UAE can now be found at the 17.90 level but it is becoming increasingly likely that we will need to see another test of 16.50 before markets are ready to establish another run to the topside.  Ultimately, a clear break here would be a highly bullish event and target new valuations back above the 20 handle.

Indicator readings in the Commodity Channel Index suggest that the recent moves lower have become oversold in the short-term and this increases the probabilities that we will see a bounce out of the support levels at 16.50.  All combined, we are now seeing a confluence of fundamental events and technical trends that point in the bullish direction for the UAE ETF as rising oil prices have improved the outlook for companies in the region. 

By Richard Cox

© 2017 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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