A clash then ensued between the military forces and supporters of Morsi, turned deadly, as dozens were killed and scores more were injured. The Muslim Brotherhood and their opponents called for fresh mass rallies, renewing fears of another round of street violence over the ousting of Morsi (read: Egypt ETF in Trouble on Political Turmoil).
Boon or Bane?
Despite the violence, this shift away from Morsi was apparently welcomed news for the market, as growth of the most populous Arab country was thwarted under Morsi�� 12-month leadership. Economic deterioration with rising inflation, higher debt levels, devaluation of the Egyptian pound and rising unemployment had dampened investor confidence in the country and eroded support for the Islamist-backed government.
Inflation climbed to 21%, up from 3% in Feb 2011, when Mr. Hosni Mubarak was overthrown. Meanwhile, unemployment is currently at a record 13.2%, while government debt has risen by $10 billion to nearly $40 billion (read: Three Country ETFs Struggling in 2013).
Foreign exchange reserves had also plunged more than 50% from $36 billion in Dec 2010 to $13.5 billion in Mar 2013. Foreign exchange reserves suffered due to declining tourism revenues and massive capital outflows. While tourists continue to avoid the country; most global investors have adopted a wait-and-watch mode till the political situation stabilizes.
ETF Impact
Despite the current turmoil, the main fund to target the nation, Market Vectors Egypt Index ETF (EGPT) was up about 9% in the past week but is still down double digits year-to-date. Volume levels were also high, as the ETF saw nearly 3 times more shares exchange hands in the past week.
The fund tracks the Market Vectors Egypt Index, which comprises companies that are domiciled in Egypt ! or generate at least 50% of their revenues in the country. The fund holds 27 securities (mostly mid cap and small cap) in its basket and has amassed $30.4 million in assets so far in the year. Expense ratio is contractually capped at 0.94% until May 2014.
The ETF�� structure also contributes to the volatility. More than two-fifths of the total assets are invested in the financial sector, with more than 9% weight assigned to the top holding ��Commercial International Bank (read: 3 Surging Financial ETFs Beating the Market).
Why is the ETF up?
Clearly some investors believe that the country will do much better in the post-Morsi environment and that brighter days are ahead for Egypt. Some are also probably banking on the funds from a long-stalled $4.8 billion loan from the IMF, which could help to put the economy back on track.
Additionally, the heightened level of stability and the relatively soon elections are promising for the nation, suggesting that a new military dictatorship will (hopefully) not follow in the wake of Morsi. In fact, Justice Adly Mahmoud Mansour, head of High Constitutional Court, has temporarily taken the presidential oath until new elections can take place, further strengthening the stability in the rocky nation.
Lastly, there have also been positive developments from some of Egypt�� neighbors in the region. Both the UAE and Saudi Arabia pledged, or are on the verge of pledging, billions in aid, suggesting that other nations in the region are supporting the developments and are at least somewhat optimistic about the country�� medium term future (see more in the Zacks ETF Center).
Bottom Line
Clearly, the country is facing political issues, and heightened protests suggest continued turmoil in the near term for Egypt. The recent surge though is promising, and suggests that the country may be able to battle through its current batch of woes.
Still, the volatility in the ETF tracking this nation looks to be immense,! with 5% ! moves��oth up and down��retty common. There is also an ever-present worry that elections will be delayed or that outright civil war will take place, either of which could cause a significant sell-off in EGPT.
For this reason, we are maintaining our Zacks ETF Rank of 5 or ��trong Sell�� on this ETF, as more trouble might be in store for the nation. Big gains are also clearly possible in short time periods, but with the incredibly high level of uncertainty in the market, it might be a prudent idea to stay away for the time being until more is sorted out in the troubled nation.
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Top Small Cap Companies To Buy For 2014: KongZhong Corporation(KONG)
KongZhong Corporation, together with its subsidiaries, provides wireless interactive entertainment, media, and community services to mobile phone users in the People's Republic of China. It also involves in the development, distribution, and marketing of consumer wireless value-added services, including wireless application protocol, multimedia messaging services, short messaging services, interactive voice response services, and color ring back tones. In addition, it offers interactive entertainment services, such as mobile games, pictures, karaoke, electronic books, mobile phone personalization features, entertainment news, chat, and message boards; and through Kong.net offer news, community services, games, and other interactive media and entertainment services; and sells advertising space in the form of text-link, banner, and button advertisements. Further, the company develops and publishes mobile games, including downloadable mobile games and online mobile games cons isting of action, role-playing, and leisure games. As of December 31, 2009, it had a library of approximately 300 internally developed mobile games. Additionally, it develops online games; and provides consulting and technology services, as well as media and net book services. The company was formerly known as Communication Over The Air Inc. and changed its name to KongZhong Corporation in March 2004. KongZhong Corporation was founded in 2002 and is headquartered in Beijing, the People?s Republic of China
Advisors' Opinion:- [By Wyatt Research Staff]
As a Chinese ADR, KONG is the leading provider of 2.5G wireless interactive entertainment, media and community services in terms of revenue to customers of company China Mobile. Institutions snatched up shares at an alarming rate with an increase of 26.7% in institutional ownership over the past three months.
A consensus of analysts expect earnings to increase by 16.9% in 2011 and 19.6% in 2012. Company earnings are estimated to increase by 62.1% this year.
Top Small Cap Companies To Buy For 2014: Achillion Pharmaceuticals Inc.(ACHN)
Achillion Pharmaceuticals, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of treatments for infectious diseases. The company focuses on the development of antivirals for the treatment of chronic hepatitis C; and the development of antibacterials for the treatment of resistant bacterial infections. Its drug candidates for the treatment of chronic HCV include ACH-1625, a protease inhibitor, which is in phase IIa clinical trial for the treatment of chronic HCV; ACH-2684, a pangenotypic protease inhibitor, which is in phase I clinical trial for the treatment of chronic HCV infection; and NS5A inhibitors for the treatment of chronic HCV infection, including ACH-2928, which is to enter a phase I clinical trial, as well as various additional NS5A inhibitors in preclinical development. Its pipeline of product candidates also includes ACH-702 and ACH-2881 for drug resistant bacterial infections; elvucitabine for HIV infection; and AC H-1095 for HCV infection. The company was founded in 1998 and is based in New Haven, Connecticut.
Advisors' Opinion:- [By Brian Nichols]
Achillion is an odd play because it has both the most upside and the most downside of any stock on this list. The company's developing and testing its hepatitis C treating drug, ACH-1625, which is currently in phase II. The results of initial testing have consisted of ups and downs, but after many years and a long process, ACH-1625, appears to be on the right track for an FDA approval.
The upside in shares of ACHN comes from two places: encouraging data from trials and its likelihood of being acquired. In my opinion, ACHN has a very high chance of being acquired in the next 6 months. Both Pharmasset (VRUS) and Inhibitex (INHX) were acquired over the last 5 months with insanely large premiums. VRUS was purchased at a 81% premium and INHX for a 182% premium. ACHN is perhaps the most speculative, but it could also be purchased the cheapest.
The stock's recently pulled back after a downgrade and is trading much lower over the last couple weeks. The stock's trend reminds me so much of INHX; the month following the VRUS acquisition when INHX traded higher by nearly 300%. But then after the one-month gain, INHX lost its momentum and traded lower by 40% before being acquired with a 182% premium. INHX traded higher after the VRUS purchase because investors thought it would also be acquired, because of its hepatitis C candidate. ACHN is following the same trend, from November 12 till January 13 the stock more than doubled, but has since retraced.
At $10 I think ACHN is a buy, it does have a good HCV candidate, and I believe that big pharma will bid to acquire ACHN in the near future. However, the risk in ACHN is if the company's not acquired, then it could have significant loss over the next year. But in a competitive biotechnology industry I believe the reward is worth the risk, and that a large pharma company will take the chance and purchase ACHN in an attempt to stay competitive and capitalize on the trend of investors being bullish on HCV treating drugs.
Top Biotech Companies To Invest In Right Now: Hot Topic Inc.(HOTT)
Hot Topic, Inc., together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the United States. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Its Hot Topic stores sell music/pop culture-licensed merchandise, including tee shirts, hats, posters, stickers, patches, postcards, books, novelty accessories, CDs, and DVDs; and music/pop culture-influenced merchandise comprising women?s and men?s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories, and gift items for young men and women primarily between the ages of 12 and 22. The company?s Torrid stores sells casual and dressy jeans and pants, fashion and novelty tops, sweaters, skirts, jackets, dresses, hosiery, shoes, intimate apparel, and fashion accessories for various lifestyles for plus-size females primarily betw een the ages of 15 and 29. As of July 30, 2011, it operated 636 Hot Topic stores in 50 states, Puerto Rico, and Canada; 145 Torrid stores; and Internet stores, hottopic.com and torrid.com. The company was founded in 1988 and is headquartered in City of Industry, California.
Advisors' Opinion:- [By Wyatt Research]
The teen retailer reported its same-store sales rose 0.4 percent, with same-store sales at its Torrid chain for overweight teens rising 7 percent. Analysts were expecting a decline.
Top Small Cap Companies To Buy For 2014: China Metro-Rural Holdings Limited(CNR)
China Metro-Rural Holdings Limited, through its subsidiaries, primarily engages in the development and operation of agricultural logistics and trade centers in northeast China. It also involves in purchasing, processing, assembling, merchandising, and distributing pearls and jewelry products. The company markets its pearls and jewelry products to wholesale distributors and mass merchandisers in Europe, the United States, Hong Kong, and other parts of Asia. In addition, it develops, sells, and leases residential and commercial properties in Hong Kong and the People?s Republic of China. The company is based in Tsimshatsui, Hong Kong.
Advisors' Opinion:- [By Wyatt Research Staff]
The stock moved significantly higher in mid-January and traded in a fairly tight range ever since. However, that could change soon. China's agricultural exports to Japan will grow if radiation continues to seep into the food chain.
China exported $593 million worth of agricultural goods to Japan last year.
Top Small Cap Companies To Buy For 2014: FuelCell Energy Inc.(FCEL)
FuelCell Energy, Inc., together with its subsidiaries, engages in the development, manufacturing, and sale of high temperature fuel cells for clean electric power generation primarily in South Korea, the United States, Germany, Canada, and Japan. The company offers proprietary carbonate Direct FuelCell Power Plants that electrochemically produce electricity from hydrocarbon fuels, such as natural gas and biogas. Its fuel cells operate on a range of hydrocarbon fuels, including natural gas, renewable biogas, propane, methanol, coal gas, and coal mine methane. The company also develops carbonate fuel cells, planar solid oxide fuel cell technology, and other fuel cell technologies. It provides its products to universities; manufacturers; mission critical institutions, such as correction facilities and government installations; hotels; and natural gas letdown stations, as well as to customers who use renewable biogas for fuel, including municipal water treatment facilities, br eweries, and food processors. The company was founded in 1969 and is headquartered in Danbury, Connecticut.
Advisors' Opinion:- [By SmallCap Investor]
The developer of stationary fuel cells used by commercial and government customers might be headed for a rebound from a pullback that began this spring - which has left the stock down 39 percent year-to-date.
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