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IMF Lowers UAE Growth Outlook: Avoid These ETFs

The International Monetary Fund (IMF) has lowered its growth forecast for the United Arab Emirates (UAE) for 2017 and 2018, owing to the impact low oil prices are expected to have on the gulf nation.


Concluding its Article IV consultation with UAE, the IMF has forecast a 1.3% growth in GDP in 2017 compared with its April estimate of 1.5%. It forecasts a 3.4% growth in 2018 compared with its April estimate of 4.4%. Although the growth rate is expected to rebound in 2018, the economy faces risks of continued decline in oil prices and rising global protectionism.


The oil economy growth is expected to ease to 3.2% compared with its April forecast of 6.2%.


Moreover, slower growth in the non-oil economy is also expected to weigh on the nation’s performance. The IMF expects a 3.3% rise in UAE’s non-oil economy compared with its earlier estimates of 3.8%.


ETFs tracking WTI crude oil and Brent crude have been massively down so far this year. United States Oil USO ETF tracking WTI is down 18.17% year to date. United States Brent Oil BNO ETF tracking brent oil is down 16.96% year to date.


Consumer prices in UAE grew 1.9% year over year in May 2017 compared with a 2.2% increase in April. Per the IMF, low oil revenues led the overall budget deficit to escalate to 4.3% of GDP in 2016 compared with 3.4% in 2015.


Let us now discuss a few ETFs focused on providing exposure to the gulf nation (see all Africa-Middle East Equity ETFs here).


iShares MSCI UAE Capped ETF UAE


This fund focuses on providing exposure to companies based out of the UAE.


It has AUM of $48.77 million and charges a fee of 64 basis points a year. From a sector look, Financials, Real Estate and Telecommunication Services take the top three spots, with 30.36%, 30.18% and 18.05% allocation, respectively (as of July 13, 2017). From an individual holdings perspective, the fund has high exposure to Emirates Telecom, Emaar Properties PJSC and First Abu Dhabi Bank with 18.05%, 15.83% and 7.78% allocation, respectively (as of July 13, 2017). The fund has returned 2.03% in the last one year and 6.53% year to date (as of July 14, 2017). UAE currently has a Zacks ETF Rank 4 (Sell) with a High risk outlook.


WisdomTree Middle East Dividend Fund GULF


This fund is a relatively less popular equity ETF that focuses on providing exposure to the dividend paying equities of Middle Eastern nations (read: Stay Away from These Middle East ETFs on Gulf Rift).


It has AUM of $17.43 million and charges a fee of 88 basis points a year. From a geographical perspective, the fund’s top three allocations are to United Arab Emirates, Kuwait and Qatar with 26.19%, 25.08% and 22.07% exposure, respectively (as of July 14, 2017). From a sector look, Financials, Telecommunication Services and Industrials take the top three spots, with 52.01%, 26.01% and 10.29% allocation, respectively (as of July 14, 2017). From an individual holdings perspective, the fund has high exposure to Maroc Telecom, National Bank of Kuwait and National Bank of Abu Dhabi PJS, with 7.87%, 7.76% and 7.75% allocation, respectively (as of July 14, 2017). The fund has returned 3.05% in the last one year and 3.24% year to date (as of July 5, 2017). GULF currently has a Zacks ETF Rank 3 (Hold) with a Medium risk outlook (read: Moody's Downgrades Qatar Outlook: Steer Clear From These ETFs).


Below, is a chart comparing the year-to-date performance of the two funds.


 
Source: Yahoo Finance


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US-OIL FUND LP (USO): ETF Research Reports
 
US BRENT OIL FD (BNO): ETF Research Reports
 
WISDMTR-ME DIV (GULF): ETF Research Reports
 
ISHARS-MS UAE (UAE): ETF Research Reports
 
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