Van Eck announced Monday morning that it will exercise its right to suspend creation orders of the Market Vectors Egypt Index ETF (EGPT) in the wake of protests in the north African country. The move is consistent with the firm’s normal policy of suspending creation orders when the underlying market is closed for an extended period, thereby helping to prevent the costs of creation activity to be borne by existing shareholders. Egypt’s stock exchange will be closed on Tuesday for a third consecutive day; the country’s main index fell 16% in the two days after protests broke out last week.
EGPT has about $12 million in assets, but has seen a surge of interest in recent sessions. Volume on Friday was nearly 1.2 million shares, more than 25 times the daily average. EGPT lost nearly 14% last week, but was surging sharply higher in Monday trading. The halt on creations doesn’t mean that EGPT will stop trading, but rather limits the ability of Authorized Participants to create new shares of the fund. Because trading in many of the underlying securities has been suspended (as a result of the closing of Egyptian stock exchanges), identifying arbitrage opportunities is no longer a simple task.
Redemptions will continue to be accepted as described in the fund’s prospectus. Van Eck said that it intends to resume normal operations for EGPT once the Egyptian Stock Exchange reopens.
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Disclosure: No positions at time of writing.