South Africa ETFs: World Cup Afterglow?
July 26th 2010 at 1:00am by Tom Lydon
South Africa lived up to its promises as the host of the 2010 Fifa World Cup. The question now is whether South Africa will be able to build upon its success looking into the future. As is the common theme throughout, exchange traded funds (ETFs) have made investing in developing nations like South Africa easier than ever.
According David Smith of the Guardian, South Africa rose above the negative media coverage to deliver an amazing World Cup experience. But the sentiment on whether South Africa can use this momentum to build out its economic infrastructure remains in question.
John Carlin of the Saturday Star said, “As host of the most-watched sporting event on earth, South Africa set out to reinvent itself in the eyes of the world, casting off its reputation as a place defined by violent crime, poverty and Aids. To a remarkable degree, it succeeded. But as the World Cup ended Sunday, what most surprised South Africans was how much the month-long sporting extravaganza had changed the way they see themselves.” [Platinum, Palladium and the World Cup.]
Yet Cella Dugger of The New York Times said, “And so the burning question in South Africa at the moment is this: Why, if the state can build stadiums on time and deliver a World Cup to Fifa, can it not treat its citizens with similar respect and efficiency? Unfortunately, it is far harder to restructure the economy to provide jobs, or to solve the crime crisis, than it is to build a stadium or an airport.”
South Africa’s Reserve Bank is, for the time being, slightly optimistic. They left the benchmark interest rate unchanged at 6.5%, reports Nasreen Seria of Bloomberg. Retail sales increased 4.6% from a year ago, extending the streak to five consecutive months of gains. [5 Infrastructure ETFs With Room to Grow.]
Although labor unions lobbied for a rate decrease, Johan Rossouw of Vunani Securities thinks it was the right decision. “There are significant labor cost pressures out there and we’re seeing a recovery in consumer spending. Inflation will bottom soon and it will be increasingly difficult to cut interest rates further.”
Dan Dzombak of the Motley Fool is a proponent of holding a third of your portfolio in developing markets such as South Africa. He recommends the iShares MSCI EAFE Index (NYSEArca: EFA) and iShares MSCI Emerging Markets Index (NYSEArca: EEM). But those aren’t South African ETFs exclusively. If you want an ETF that is exclusive to South Africa, take a look at iShares MSCI South Africa Index (NYSEArca: EZA).
For more stories on South Africa, visit our South Africa category.
Sumin Kim 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.