3 Ways to Profit From Growth in Africa
NEW YORK (TheStreet) -- Financial news from China moves the global equity markets. But economic growth in Africa could be what rewards long-term investors the most.
Mark Mobius, manager of an emerging market mutual fund, advises that the strongest investment opportunities are in Africa, where he expects technology advancements to accelerate economic growth. Investors could profit from the expanding African economy with exchange traded funds, foreign stocks that do business on the continent, or indigenous equities that will benefit from greater commercial activity in the local markets.
ETFs are ideal for profiting from economic growth in areas like Africa.
These securities provide more research, greater diversity, and protection against tax and currency losses more efficiently than an individual investor. That is critical for investing in emerging market countries. For Africa, there is Market Vectors Africa (AFK) and SPDR Emerging Middle East & Africa (GAF).
Market Vectors Africa tracks the largest and most liquid companies, such as Nigerian Brewers PLC and Commercial International Bank Egypt Sae, the largest private-sector lender in that country. It weights its holdings on the gross domestic product of the companies it tracks. As a result, it contains large and small cap firms. Egypt, Nigeria and South Africa account for more than half of Market Vectors Africa's assets.
More than 90% of SPDR Emerging Middle East & Africa is invested in South Africa, the base for firms with branches across the continent. Investors should note that the biggest holding in terms of market capitalization is Commercial International Bank Egypt Sae, at $8.7 billion, so most of the stocks are small caps by U.S. standards.
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