Broadly speaking, investing in South Africa, an emerging
market on a continent chock full of volatile frontier markets,
has proven rewarding over the past decade. While not without the
usual hiccups experienced by emerging markets ETFs in recent
years, the iShares MSCI South Africa Index Fund (NYSE:
), the lone South Africa-specific ETF on the market, has gained
nearly 250% since its February 2003 debut.
Since then, South Africa has seen its economic stock rise. The
resource-rich country is not only by far the largest African
economy, it has the distinction of having joined Brazil, Russia,
India and China in the BRICS acronym.
Today, South Africa still offers opportunity for investors,
but not without a mixed bag feel about the situation. The country
is arguably politically volatile and unemployment is almost 24%.
On the other hand, Africa's share of global foreign direct
investment has been steadily climbing over the past decade with
South Africa being the primary destination for foreign
Regarding ETFs, the P/E ratio for EZA's components is
currently 17, indicating the South African equities found in this
fund are more richly valued than the holdings of the iShares MSCI
Brazil Index Fund (NYSE:
) and the iShares FTSE China 25 Index Fund (NYSE:
). EZA's price/book ratio is nearly double that of FXI's.
So it can be said that South African stocks aren't cheap
relative to their emerging markets. With that, let's examine ETFs
that help investors gain some South Africa exposure without an
entire commitment to country as is found with EZA.
First Trust ISE Global Platinum Index Fund (NYSE:
We profiled the unheralded First Trust ISE Global Platinum Index
earlier this year and the ETF proceeded to gain
immediately following that piece. PLTM has slid since early March
as investors have dialed back their appetites for risk, but the
ETF remains a valid way to get exposure to South Africa.
Not only is South Africa the world's largest
platinum-producing country, its the second-largest palladium
producer behind Russia. PLTM also offers significant palladium
exposure and South Africa represents nearly 30% of the ETF's
country weight. If PLTM breaks support at $18, it's time to
EGShares Consumer Services GEMS ETF (NYSE:
The knock on the EGShares Consumer Services GEMS ETF is obvious:
It's thinly-traded, so much so that it doesn't trade everyday.
Still, VGEM is up almost 19% year-to-date as emerging markets
consumer ETFs have flourished.
In fact, VGEM has dramatically outperformed the EGShares
Emerging Markets Consumer ETF (NYSE:
), arguably the best of the EM consumer ETF lot in terms of AUM
and liquidity. South Africa accounts for 25% of VGEM's weight.
South Africa looms large in ECON as well with an allocation north
PowerShares S&P Emerging Markets Low Volatility ETF
In the rapidly expanding world of
low volatility ETFs
investors looking for exposure to South Africa have some options.
EELV is probably the best as the new fund allocates almost 20% of
its weight to South Africa, more than double the concentration
offered by the rival iShares MSCI Emerging Markets Minimum
Volatility Index Fund (NYSE:
Global X Pure Gold Miners ETF (NYSE:
It's no secret that South Africa is one of the world's largest
gold producers and it's no secret that gold mining stocks have
struggled mightily compared to gold futures and physically-backed
ETFs. Should that trend reverse course, and we're not promising
that it will anytime soon, GGGG and its almost 14% weight to
South Africa, might be the preferred option.
GGGG, which is just 14 months old, has easily outpaced the
larger Market Vectors Gold Miners ETF (NYSE:
) this year. Again, that's not saying much.
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