Don't Forget The Middle East

Investors in the U.S. should not ignore the Middle East region as a prospective emerging markets investment source.

The Middle East is of course rich in energy resources such as oil and natural gas, and substantially building its refining and other energy manufacturing volume. The region does measure well in other natural resources such as in the global production of some important minerals: Jordon 7th in potash, Morocco 7th in cobalt, Saudi Arabia 9th in gypsum, Turkey 10th in dolomite, Qatar 15th in ammonia, and Lebanon 15th in olive oil (agricultural). [Sources: U.S. Geological Survey (USGS) Mineral Resources Program, 2006; U.S. Department of Agriculture (USDA), 2005]

And according to an International Monetary Fund’s (IMF) “World Economic Outlook” report released in October 2010, “The Middle East and North Africa Region is Recovering Strongly.” The IMF reports that prospective GDP growth for this region for 2011 is 5.1% compared to U.S. 2.3%.

There are some Exchange Traded Funds (ETFs) on U.S. markets that provide a representation of Middle East stocks. These have only recently been introduced but unfortunately don’t yet command the volume necessary for broad investor participation.

The best opportunity to directly access Middle East stocks, in my opinion, is on the local exchanges in Middle East countries. Investors need to be willing to open an account in a Middle East country—it’s not too difficult. There are currency conversion and tax implications to such foreign-based investing.

I began this approach to investing many years ago sensing the potential of Latin American economic growth. I helped clients buy individual stocks on local Latin stock markets. Quite a few of these stocks eventually became listed on major foreign securities exchanges increasing dramatically investor participation in these stocks. Long-time clients today continue to thank me for building positions for them in such companies as Fomento Economico Mexicano, S.A.B. de C.V.—today known as Coca-Cola FEMSA (NYSE: KOF), Telefonos de Mexico (NYSE: TMX), and Cifra S.A. de CV—today Wal-Mart de Mexico, a subsidiary of Wal-Mart Stores, Inc.

Might this same process occur with Middle East stocks? It’s certainly too soon to tell but a few Middle East stocks presently trade on the London Stock Exchange.

There are risks in initiating positions in the Middle East stocks at this time which is why it is important to consider the timing of such a decision and to have a well-thought and planned strategy that manages this risk.

(Tom Fyler is President of Commodities & Securities, Inc., a Registered Investment Advisor, and a Registered Commodity Trading Advisor ("CTA") with the Commodity Futures Trading Commission ("CFTC") and a member of the National Futures Association ("NFA"). He may be contacted at info@EssentialsInvesting.com. Mr. Fyler has developed a specialty in investing opportunities in stocks on Middle East stock exchanges.)

Special Risk Disclosure: There are special risks involved when investing on foreign securities exchanges and in the Middle East region that have not been presented or detailed in this article. Investors should make every effort to learn and understand these risks before making a decision whether to invest. Economic projections cited by sources in the article do not necessarily represent the conclusions of the writer.

Risk Disclosure: This communication is for informational purposes only and should not be construed as containing or providing specific investment or financial advice. Readers should be aware that there is risk of loss of some or all funds when investing in stocks, bonds, mutual funds, ETFs, real estate, commodities and/or currencies any of which may not be appropriate for all investors, and that there is a risk of loss when using any particular trading or investing strategy. This information may contain statements or forward-looking propositions that should be understood as the opinion, belief or preference of the writer.