When people get questioned on Africa’s most important resources, most people think of tangible goods like fossil oil, uranium, diamonds or even gold – while economists should be greatly interested in Africa’s youth. An economic upward trend is visible as the continent recovers from the global economic reduction, intriguing investors to pour money into an Africa ETFs.
Seeing as in future prospects the enormous demand for Africa’s resources won’t slow down, the commodities sector of the FTSE/JSE Africa Top 40 Index ETF is greatly weighted with 45 %, thus holding a high correlation of commodity prices. The FTSE JSE TOP 40-Index contains the 40 most significant companies in Africa – based on their market capitalization – with resources, bank (11 %) and food (9 %) industry markets being the most important components of the index.
Interestingly, the bank industry receives a high percentage distribution in the fund which is around 29 % followed by fundamental resources around 19 % and telecommuncation services at about 12 %. However, the AFK’s holdings are composed of oil and gas companies for about 11 % only, fairly low compared to the bank industry. Still, AFK records a plus of more than 5 % this year already. These statistics illustrate AFK’s ever-increasing importance as an international ETF, finally being the heaviest ETF in South Africa.
There are quite a few Africa ETFs that tend to break forth, such as The Market Vectors Africa Index ETF (AFK) in which many of the Africans net worth is included. Moreover, it’s the ETF with the highest reach of play and the most intense focus on African stocks only. It is conceived to replicate the efficiency of the Dow Jones Africa Titans 50 Index which is a scale of companies which have their seat in Africa or create most of their sales on African ground.
Still, there’s more to it: Africa ETFs like iShares MSCI South Africa Index Fund (EZA) invest in stocks market-listed in South Africa, breaking forth inexorably beyond the BRIC part of countries. Quite a lot of companies and firms (even financial ones) belong to EZA, relying on the opulence of South Africa’s resources. In addition that, the ETF Market Vectors Egypt ETF which has recenlty been opened, offers exposure to Egyptian stock markets, giving especially the telecommunication sector a boost.
On the downside, funds like MSCI South Africa impel the index, but at the same regression of resources will affect ETFs, national markets and economists terribly. However, Kenya plans on developing new technologies producing renewable energy, hence potential exists that Africa’s economy will increase as a whole, leveling new banch of industries so to speak.
On balance, Africa has issues but also a lot of potential, but in economic terms there’s usually a risk when there’s a choice. Seeing as Africa is in good demand lately, Africa ETFs are very attractive for today’s investors and future economists.