The Egyptian equity market as measured by the Egyptian country constituent of the Russell Emerging Markets Index outperformed the Russell Emerging Markets Index and the Russell Frontier® Index since last year’s Russell reconstitution and year-to-date as of 13 June.
This positive performance has occurred as the nation deals with political uncertainty and assesses results of its recent elections.
Despite the relative political uncertainty in Egypt since the overthrow of President Mohamed Morsi in June of last year, the Egyptian country constituent within the Russell Emerging Markets Index has outperformed the Russell Emerging Markets Index and the Russell Frontier Index from the completion of the last Russell Indexes Reconstitution on July 1, 2013 through June 13 of this year. In fact, from July 1, 2013 through June 13, 2014, the Egyptian country constituent returned more than 76% and, in 2014 year-to-date as of June 13, it has returned nearly 28%.
Russell Investments senior emerging markets portfolio manger Gustavo Galindo:
“While we believe the political situation in Egypt is not yet stable, it seems better than it was a year ago and the Egyptian equity market appears to be willing to give it the benefit of the doubt. Egypt is one of the heavyweight nations economically in Africa, which we see as a growth region. So, while we see Egypt as a volatile market in the short-term, it may be a source of continued investment opportunity longer-term depending on how the political situation evolves.”
Russell Investments senior index research analyst Mat Lystra:
“Despite recent strong performance for the Egyptian equity market, our multi-year research process concluded that the sustained macroeconomic uncertainty in Egypt and ongoing concerns around the convertibility of its currency had driven Egypt’s market risk to frontier-relative levels. Our decision to reclassify Egypt from emerging market to frontier market status completes a three year market risk review process, or glide path, which began in 2012.”
Lystra provides an update on Russell Indexes country classification process and highlights the process which drove the recent decision to reclassify Egypt to a frontier market in a special Index Insights paper on the Russell Indexes 2014 reconstitution website.