Africa ETFs: Slim Pickings
NEW YORK ( TheStreet) -- With over 1,000 products currently available, the ETF universe caters to investors looking for exposure to seemingly any corner of the global marketplace. One region that has remained relatively untouched has been Africa.
This is not to say that fund sponsors have not tried to venture into this corner of the globe. On the contrary, Van Eck currently offers funds like the Market Vectors Egypt ETF (EGPT) and the wide-reaching Market Vectors Africa Index ETF (AFK), which targets nations including South Africa, Nigeria, Egypt, and Morocco.
Interestingly, despite its branding as an Africa-focused product, AFK's Web site notes that a full quarter of its assets are actually dedicated to companies based outside of the continent including the U.K., Canada, the U.S. and Australia.
AFK's challenges don't end there. In addition to its peculiar breakdown, the fund has also struggled in the past to gather steam. At this time, its average daily trading volume stands at around 20,000. In the nearly four years it has been available, it is failed to surpass $100,000 in assets. Illiquidity issues pose a very real threat.With AFK struggling with investor disinterest and Egypt still mired in political, social, and economic uncertainty, neither of these two products is suitable for most investors at this time. This does not mean, though, that Africa must be avoided entirely. Rather, one fund: the iShares MSCI South Africa Index Fund (EZA) may still be worth keeping an eye on. During the opening half of the week, the markets were greeted to some promising news regarding the strength and resilience of South Africa. The nation's economy, the largest in the continent, grew by 3.2% over the past three months, outpacing analyst expectations and leaving the previous quarter's 1.7% growth in the dust. In 2011, the nation's GDP growth clocked in at 3.1%. According to economists quoted by Bloomberg, manufacturing and mining improvements and increases on the part of the consumer were among the qualities that contributed to this showing.
EZA is particularly well suited to benefit from the hardiness of South African miners and the nation's consumer class. With companies like AngloGold Ashanti (AU), Gold Fields (GFI), and Impala Platinum listed among its top 10 holdings, I have often considered the fund to be a unique proxy play on precious metals miners. In total, materials producers account for nearly a quarter of the fund's assets. Consumer staples and consumer discretionary companies together represent an additional 20% of the ETF's portfolio.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts