Egypt ETF Soars as Protests Escalate

Already one of the year's best-performing country-specific funds, the Market Vectors Egypt ETF (NYSE:EGPT) is building on those gains today despite ominous headlines out of the North African country. Even with a reputation for being sensitive to political unrest, EGPT is trading higher by 2.8 percent as protesters in Cairo have reportedly climbed the walls of the U.S. embassy there.

The protesters yanked down the U.S. flag and proceeded to tear and burn parts of it, replacing the stars and stripes with a black flag containing the words "There is no God but Allah and Mohammad is his messenger," according to Ahram Online.

With the protests, it might not be surprising that volume in EGPT has eclipsed double the daily average, but the bullishness in the ETF today could be viewed as a surprise. Then again, it can be said this is just another day at the office for EGPT, which now has $54.8 million in assets under management compared with $51.6 million at the end of August.

EGPT has rallied almost 7.2 percent since news broke the U.S. is considering forgiving $1 billion in Egyptian debt. That news broke last week.

While EGPT has had its stumbles this year, the overarching theme has been bullish for the fund. In the past month, EGPT has jumped 16.4 percent. Over the past 90 days, the ETF has returned almost 40 percent. Year-to-date, EGPT is up nearly 63 percent, trouncing the returns offered by ETFs tracking more stable developing markets such as Brazil, China, India and others.

As has been previously noted, there are risks to the Egypt investment thesis beyond the country's frontier market status and the recent history of political volatility, high unemployment and dwindling foreign reserves chief among those risks.

On the other hand, there are some reasons to be cautiously bullish on Egypt's economy, including a domestically-focused economy and the potential to attract large amounts of foreign direct investment.

Some investors are already buying into the Egyptian rebound/growth story. EGPT's $54.8 million in AUM may not sound like much, but that is a 25 percent increase from where the ETF's AUM total stood on August 1.

Past performance and inflows are not guarantees of good things to come, but if EGPT can move higher on a day when less-than-positive headlines are flowing from the country, that is a bullish sign.

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(c) 2012 Benzinga does not provide investment advice. All rights reserved.