The International Monetary Fund (IMF) revised Africa’s full-year 2010 economic growth estimates from 4.3% to 4.5%, putting the region at the forefront of the global economic recovery, writes Sam Hopkins for Wealth Daily. [Why Africa ETFs are forecast for growth.]

Still, IMF Chief Dominique Strauss-Kahn cautioned that “Africa will continue to face large, persistent and costly shocks. Without a secure standard of living, people might turn to unproductive or even violent activities, possibly leading to instability, a breakdown of democracy, or war.”

The IMF took a different approach in lending money to Africa during the financial crisis. The Fund allowed African countries to expand budget deficits and engage in loose monetary policy. Inflation was curbed with the aid of zero-interest IMF loans that helped support African currencies.

In a continent that has a poorly built fixed-line communications infrastructure, mobile phones has become the primary mode of communication in Africa. International mobile phone giant Vodafone (NYSE: VOD) wants to tap into Africa’s large cellphone markets with its Vodafone 150, which is touted as the world’s cheapest cellphone.

Market Vectors Africa ETF (NYSEArca: AFK) covers the growth potential of countries like Nigeria and Morocco with a price-to-earnings ratio of 10. The fund includes some obscure holdings to draw volume, and that could trap investors when AFK tanks, says Hopkins.

The recently launched Market Vectors Egypt Index (NYSEArca: EGPT) offers targeted exposure to one of Africa’s top economies. [Why Egypt ETF May Be Worth a Peek.]

The iShares MSCI South Africa Index Fund (NYSEArca: EZA) may be considered the best play on Africa since South Africa is the biggest economy on the continent. Caution, though: the country has a high unemployment rate, topping nearly 25%, and its economy may take a large hit if any major drops occur in commodities.

SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF) gives investors a more diversified play on the African and Middle Eastern economies. South Africa, Egypt and Morocco are well represented in this fund and more countries means mitigated risk.

PowerShares MENA Frontier Countries Portfolio (NYSEArca: PMNA) gives investors another diversified play on the African and Middle Eastern economies. Egypt and Morocco are major components in this fund and, like EZA, more countries means lower risk.

If you want exposure to Africa but are concerned about risk, that doesn’t necessarily mean you have to wait on the sidelines. If you’ve found an ETF that’s otherwise right for you, consider incorporating a simple strategy with a stop loss (and use it!). One we follow is the 200-day moving average; when a position is above that mark, it’s a buy signal, when it’s below, it’s a sell. [More on Trend Following Here.]

For more information on Africa, visit our Africa category.

Max Chen contributed to this article.

The International Monetary Fund (IMF) now projects Africa’s economy will expand 4.3% this year, up from the previously forecast 4%. Next year could be even better – it’s expected to grow 5.3% then, reports Mike Cohen for Bloomberg. The IMF also expects sub-Saharan Africa’s economy will expand 4.3% this year and 5.5% the next. [Africa ETFs: Recovery Coming Slowly.]

The IMF raised its forecast as a result of higher commodity prices and government stimulus programs that helped mitigate the effects of the global recession.

In Tanzania, higher gold demand in 2010 is expected to lead the mining sector’s revival and the chairman of Tanzania Chamber of Minerals and Energy, Mr. Ami Mpungwe, said that they project the industry to contribute more than $1 billion to the Tanzanian economy this year, according to TheCitizen Newspaper. Tanzania is Africa’s third largest gold producer, and it also has reserves of uranium, nickel and coal.

For more information on Africa, visit our Africa category.

• iShares MSCI South Africa Index Fund (NYSEArca: EZA)

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF)

• Market Vectors Africa ETF (NYSEArca: AFK)

Max Chen contributed to this article.

BRIC countries  have been given a lot of press lately, but there are other interesting things taking place outside of the four economies, primarily in a group of countries categorized as the “MAVINS,” according to the ETFDesk Daily. [The BRIC economies today.]

While they’re not all emerging markets, one thing they all bring to the table is potential, thanks to strengthening economies and increasing growth potential.

Just who are these people, and why should we be paying attention?

Mexico. The country has a growing middle class and a positive population growth trajectory. Observers believe that the close proximity to the United States will allow Mexico’s government to basically become an extension of the U.S. economy and rapidly allow Mexico to close its income gap with us. Furthermore, Mexico is also a commodities play. The country is the world’s seventh largest oil producer, as well as a large exporter of silver, fruits, cotton and coffee. [The key to Mexico's success.]

• iShares MSCI Mexico Investable Mkt Idx (NYSEArca: EWW)

Sector Allocations: Telecommunications Services, 35.2%; Consumer Staples, 22.8%; Materials, 13.6%; Consumer Discretionary, 12.7%; Industrials, 9.1%.

Australia. Australia is the richest commodities source in the world and it basically backs Chinese growth. China is Australia’s largest trading partner and is also a major investor of farmland and real estate in Australia. Additionally, the country has a well-developed manufacturing and services economy. The only problems that hold the country back are its water shortages and lower population per area of land. As the U.S. dollar appreciates, however, it could put more pressure on the carry trade and the Australian ETF.

• iShares MSCI Australia (NYSEArca: EWA)

Sector Allocations: Financials, 43.6%; Materials, 26.3%; Consumer Staples, 10%; Energy, 6.8%; Industrials, 4.5%; Health Care, 3%; Consumer Discretionary, 2.2%.

Vietnam. Vietnam has a quickly liberalizing economy, near-term political stability and a centralized command of a communist government. The country has a rich farm lands and it is developing its manufacturing sector. The population in Vietnam is already larger than that of France or Germany, and population growth is on an upward trajectory. Vietnam shares a lot of economic similarities to the China of 20 years past, such as the much lower labor costs that will make it a manufacturing contender. [Vietnam on track for growth.]

• Market Vectors Vietnam (NYSEArca: VNM)

Sector allocations: Financials, 44%; Energy, 24.2%; Industrials, 15.7%; Materials, 7.4%; Consumer Discretionary, 2.5%; Utilities, 2.3%; Consumer Staples, 1.6%.

Indonesia. The newly Democratic nation is becoming a fast-growing Asian economy. The average standard of living is still low, but that only means that the potential is that much greater. For instance, if Indonesia’s economy were on par with Mexico’s, it would be three times its current size. Indonesia is also rich in oil, gas, coal, tin, copper, silver and gold. Conveniently situated next to India and China, Indonesia is becoming a marginal supplier of natural resources to its increasingly insatiable neighbors. [Indonesia among the year's best.]

• Market Vectors Indonesia ETF (NYSEArca: IDX)

Sector allocations: Financials, 25.2%; Materials, 23.1%; Energy, 14.6%; Consumer Staples, 12.5%; Consumer Discretionary, 10.9%.

Nigeria. Nigeria is the most populous country in Africa, with 155 million people, and it is expected to maintain a high birth rate through 2050. The country is growing and starting to liberalize its economy, having only just come into a Democracy. Some have argued, however, that Nigeria is heavily dependent on its rich oil reserves. Corruption is still rampant and there are some ethnic and religious conflicts. [Recovery in Africa ETFs.]

• There is no Nigeria country-specific ETF, but an investor may gain exposure to the region through Market Vectors Africa ETF (NYSEArca: AFK) – Nigeria is around 22%.

Sector allocations: Banking, 27.9%; Basic Resources, 19.7%; Telecommunications, 12.2%; Oil & Gas, 11.5%.

South Africa. South Africa is the strongest African economy, with modern institutes and commodity wealth such as gold, platinum, coal and diamonds. The economy is diversified with mining, agriculture, services, and manufacturing. Furthermore, South Africa is benefiting from its commodities advantage. Still, half the country lives below the poverty line. [South Africa, a return to normalcy?]

• iShares MSCI South Africa Index Fund (NYSEArca: EZA)

Sector allocations: Materials, 27.8%; Financials, 26%; Telecommunication Services, 12.9%; Consumer Discretionary, 11.4%; Energy, 10.5%.

Max Chen contributed to this article.

It is hoped that Africa’s economy will get a strong footing for its economic recovery by next year, write Dan Ran, Liu Ying for China View. African countries are suffering from the swift decline in oil revenue, drop in demand of luxury goods like diamonds and a depressed tourism industry.

The International Monetary Fund (IMF) lowered Africa’s growth projections to 1.7% from 2% for the year. In the African Economic Outlook 2009 issued in May by the African Development Bank, the Organization of Economic Cooperation and Development and the United Nations Economic Commission for Africa (UNECA), Africa’s economy is estimated to expand 2.8% this year, a significant drop from the pre-crisis projections of 5.7%. [Opportunities in the Middle East.]

South Africa, the continent’s largest economy, is likely to fall into its first recession in 17 years, with the World Bank forecasting a 1.5% contraction and a drop of 2.2% by the IMF. [South Africa: return to normalcy in 2010?]

Struggling developed countries may also cut aid to Africa, exacerbating poverty and unemployment problems. Drought and food shortages have also contributed to the slow turnaround of economies.

However, the IMF believes the continent will be better-off next year, estimating a 4% expansion for 2010, and other African governments are reporting similar optimistic views of next year’s growth projections. [What about frontier markets?]

For more on Africa, visit our Africa category.

• iShares MSCI South Africa Index Fund (NYSEArca: EZA): up 48.6% year-to-date

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 46.5% year-to-date

• Market Vectors Africa ETF (NYSEArca: AFK): up 32.5% year-to-date

Max Chen contributed to this article.

Middle East ETFs, such as the SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF), Market Vectors Gulf States (NYSEArca: MES) and WisdomTree Middle East Dividend ETF (NASDAQ: GULF), are a subset of a relatively new class of ETFs called frontier ETFs, remarks Bill Luby for Seeking Alpha. (Dubai worries agitate Middle East).

However, Luby believes that Claymore/BNY Mellon Frontier Markets (NYSEArca: FRN) and PowerShares MENA Frontier Markets (NYSEArca: PMNA) stand out as real diversified frontier plays. (Why frontier markets may be the next big thing).

PMNA is a regional ETF based on the NASDAQ OMX Middle East North Africa Index, with a strong emphasis on the Persian Gulf. Top country allocations include United Arab Emirates (22.6%), Egypt (20.2%) and Kuwait (16.9%). (Four reasons Africa looks appealing).

FRN is a more geographically diversified ETF based on the Bank of New York Mellon New Frontier DR Index. Top country allocations include Chile (28.6%), Poland (15.9%) and Egypt (15.4%).

Additionally, there is the regional frontier ETF Market Vectors Africa (NYSEArca: AFK) and the recently launched single-country ETF Market Vectors Poland (NYSEArca: PLND). (Poland’s growing economy targeted with new ETF). Van Eck is also planning new country-specific ETFs for Egypt and Kuwait.

For frontier markets, the same principles of investing in emerging markets apply: the broader your fund is, the lower your risk. Potential investors should note that frontier markets are considered riskier than developed markets and the multi-country and single-country funds can suffer from low liquidity and high volatility.

Have a strategy for entry and exit in place before you invest to best protect yourself. More information on trend following can be found in The ETF Trend Following Playbook.

For more information on frontier markets, visit our frontier markets category.

Max Chen contributed to this article.

Over the next three-to-nine months, frontier markets are anticipated to outperform the emerging and developed markets, reports Allen Wan for Bloomberg. The Middle East is in a position to lead the way, since the region has not yet recovered from the global market meltdown, making valuations cheap. The region’s equities are expected to catch up as corporate earnings improve. (Read about five risks to the Middle East economy).

A frontier market is generally a country that is fairly poor. An example is most of Africa. (Four reasons Africa is appealing).

The markets are usually locked up with little or no liquidity, but they can be a good diversification tool for investors. They can be long-term uncorrelated investments and they have enormous potential for growth. There are currently 28 countries listed as frontier markets, reports IS for Intelligent Speculator. (Read about MSCI’s latest review of these markets).

For more stories about frontier markets, visit our frontier market category.

• Claymore/BNY Mellon Frontier Markets (NYSEArca: FRN): up 57.2% year-to-date

• PowerShares MENA Frontier Markets (NYSEArca: PMNA): up 24% year-to-date

• Market Vectors Gulf States (NYSEArca: MES): up 24.9% year-to-date

• WisdomTree Middle East Dividend (NYSEArca: GULF): up 17.4% year-to-date

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 49.8% year-to-date

• Market Vectors Africa (NYSEArca: AFK): up 43.5% year-to-date

Frontier markets are not stable enough to be named “emerging,” but these markets do have more potential to deliver higher returns to compensate for the greater risk, remarks Will McClatchy ETFZone. Frontier markets are defined as suffering from extreme volatility, poor trading, corruption, dismal accounting and a tendency to expropriate foreign capital.

What’s so appealing about frontier investments? First, the fastest-growing countries are currently the ones that are “economically delayed.” Second, risk in frontier markets is greatly reduced when added in small amounts to a portfolio.

Some frontier market regions to consider include:

• Africa is a prime example of a frontier market. During the financial debacle, Africa did not suffer as much from the credit crunch since it was lightly leveraged. The continent also has a great amount of natural resources.
• States of the Persian Gulf and Middle East hare developing into emerging status. The oil-rich states are raking in the benefits of increasing wealth, transparency and infrastructure development.
• Eastern Europe, former Soviet satellite states and Asian countries do have some ready supply of natural resources, but some regions are corrupt and home to organized crime.
• Smaller Latin American countries like Bolivia, Ecuador and Peru are sometimes categorized as “frontier.” However, most Latin American ETFs are more weighted toward advanced economies, and single-country ETFs don’t cover all the nations.

A few of the frontier market ETFs out there include:

• Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: FRN): up 42.7% year-to-date; expense ratio is 0.65%; country samplings include: Egypt, Colombia, Kazakhstan, Chile and Poland

• Market Vectors Gulf States ETF (NYSEArca: MES): up 18.2% year-to-date; expense ratio is 0.98%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 58.3% year-to-date; expense ratio is 0.6%; note that GUR has a high allocation to Russia

• Market Vectors Africa ETF (NYSEArca: AFK): up 32.2% year-to-date; expense ratio is 0.83%; country samplings include: South Africa, Nigeria, Morocco and Egypt

Fore more information on frontier markets, visit our frontier markets category.

Max Chen contributed to this article.

The reason Africa is becoming an interesting area for investment, writes Aaron Levitt for Investopedia, is because the continent has a medley of beneficial factors:

• The region has experienced an average 6% growth since 2004
• Africa contains almost 40% of the earth’s total gold reserves and 30% of mineral deposits are in the continent’s ground
• African nations have favorable global trade pacts, which help fund African infrastructure and telecommunications
• Most importantly, countries in the region are becoming more politically stable
  

An interested person may consider investing in the region through ETFs, but there is a caveat. Since Africa is an emerging market that’s still going through a big growth phase, volatility is a risk factor to keep in mind.

South Africa is the largest economy on the continent and it often has a higher weighting in regional ETFs as well as its own ETF:

• iShares MSCI South Africa (NYSEArca: EZA): up 44.6% year-to-date

• WisdomTree Dreyfus South African Rand (NYSEArca: SZR): up 30.2% year-to-date

• SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 40% year-to-date

• Market Vectors Africa (NYSEArca: AFK): up 33.9% year-to-date

For more information on Africa, visit our Africa category.

Max Chen contributed to this article.

The major demographic transition that Africa is following is that as families move up in status in developed areas of Africa, they are having fewer children. This is a trend seen in developed areas of the world – as countries become richer and more developed, they have fewer children per family, explains The Economist.

An emergent African middle class is taking out mortgages and moving into newly built flats, and two children is what they want. Restraining population growth is also seen in developing Asian countries and Latin America.

Will the “familiar” Africa become the “old” Africa?: a place of large families and high fertility, a continent in which societies are under extreme stress and where the young massively outnumber the old, environmentally degraded, ravaged by poverty, hunger, HIV/AIDS and civil war?

If the “demographic dividend” kicks in and the “new” Africa continues to develop, the societies may grow wealthier, they may move from high fertility to low, and their working age population will dominate. A successful cycle of growth will kick in but only if Africa chooses the right policies and takes initiative to solve their current problems.

Demography will decide if the next generation succeeds and changes the course for the future.

• iShares MSCI South Africa (EZA): up 38.3% year-to-date

• SPDR S&P Emerging Middle East & Africa (GAF): up 34.9% year-to-date

• Market Vectors Africa (AFK): up 31.1% year-to-date

For more stories about Africa, visit our Africa category.

In a recently released Cabinets report about the performance of the Egyptian economy, Egypt’s economy experienced an average 7.2% growth rate the last fiscal year (2007-2008) after 4.5% growth in 2004-2005, according to iStockAnalyst.

The growth in Egypt was attributed to the advancement of Gamal Mubarak in the ruling National Democratic party’s (NDP) and the free-market capitalism he espoused, reports Sora Khorshid for The Guardian. However:

• The neoliberal economic reforms are said to have harmed ordinary citizens while benefiting the well-connected.
• Transparency International ranks Egypt 115 out of 180 countries in the 2008 Corruption Perception Index.
• In a 2007 cabinet poll, 75% Egyptians believe corruption is prevalent, especially between the regime and businessmen.
• Around 20% of Egyptians own 80% of the country’s accumulated wealth. 43% of Egyptians live on less than $2 a day and 28.6% are illiterate.

Labor strikes are now frequently held as a popular sign of anger with the regime. The regime has continued to crack down on the opposition. This unrest could ultimately weigh on not only the Egyptian economy, but its related ETFs. On the plus side, ETFs focused on this region are diversified, thus spreading out the risk among several countries instead of just one.

As a frontier market, Egypt has the potential to be volatile. If this is an area of the world you’re considering, have an exit strategy in place to protect yourself.

• SPDR S&P Emerging Middle East & Africa (GAF): up 29.8% year-to-date; Egypt is 5.6%

• Market Vectors Africa ETF (AFK): up 29.3% year-to-date; Egypt is 14.2%

• Claymore/BNY Mellon Frontier Markets (FRN): up 34.2% year-to-date; Egypt is 15.7%

For more information on Africa, visit our Africa category.

Max Chen contributed to this article.