Africa ETFs: Will Foreign Investment Help or Hurt Them?
August 13th, 2009 at 3:00pm by Tom Lydon
It’s not only developed countries that are pouring money into foreign countries. Emerging economies are investing and cultivating trade agreements with African nations and the continent’s related exchange traded fund (ETFs) may reflect the resulting growth.
Around one-third of Africa’s total trade is with emerging or other developing countries, indicating a shift away from traditional trading partners. The EU’s dominance over trade with Africa is receding, most notably in imports, which now only accounts for a third of Africa’s inward trade.
- Trade and investment has been on the rise with emerging markets such as China, Brazil, India and Malaysia, writes Roy Laishley for allAfrica. African consumers have benefited from low-priced imports, and exports of oil, iron ore, cocoa and other commodities have greatly increased Africa’s earnings.
- Some observers have argued that the raw-materials-for-infrastructure type trades could allow Africa to become too dependent on commodities and could result in less local job creation or bring in fewer new technologies.
- China is Africa’s second-largest trading partner. Chinese companies are building new townships with schools, business sites, access roads, sewage plants and other needed infrastructure. China’s planned hydroelectric investments could also increase Africa’s generating capacity by 30%.
- Governmental reviews of major infrastructure and oil deals, as well as the recent downturn, have caused a number of projects involving Chinese, Russian, India and South Korean companies to be delayed.
- There is a growing concern over the trade and investment practices of some emerging market countries toward Africa. The latest controversy involves the interest of emerging economies and Western companies in acquiring large tracts of African land to cultivate maize, wheat and other food crops. On one hand, the leasing of land by foreigners is a sensitive topic in Africa. But the transferable agricultural technologies may be an important component in the trade and investment deals with Africa.
- SPDR S&P Emerging Middle East And Africa (GAF): up 31.5% year-to-date
- Market Vectors Africa ETF (AFK): up 31.8% year-to-date
For more information on Africa, visit our Africa category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.