The largest country in terms of weighting in the fund is Chile, contributing over 32%. The country ETF has sold-off by over 10% so far in January:
Have you heard of any riots in Chile recently? I haven't. Yet, the media blamed Egypt for global market weakness last week. The truth is, underlying weakness (and the related theme) started much earlier.Obviously, something else is going on. Chilenean stocks by the way fell because Chile's central bank pledged to intervene in the currency market and increase their foreign reserves.
Let's take a look at the second largest Frontier Market ETF country contributor: Columbia. Their stock market lost 20% at the beginning of November 2010, again strongly underperforming US stocks since then:
Egypt is a just a puzzle piece in a much bigger picture of frontier (and emerging) market weakness, which is starting to spill over to developed markets. I don't think market conditions will change even if the political situation gets resolved. So the question "Can Egypt Take the World's Markets Down" has to be answered with a "no". Instead, bigger forces can lead to a substantial market decline. Obviously, investors started to pull their money out of risky assets, such as emerging markets and US small cap stocks (see my other posts on this topic this month) long before the Egypt crisis took a front seat in the daily news.