Holdings: EEG holds companies domiciled in emerging markets; some of the top companies in the fund include Russian natural gas company Gazprom, Brazilian energy company Petroleo Brasileiro, Latin American wireless provider America Movil and Bank of China.

Objective: EEG seeks to track the Dow Jones Emerging Markets Titans Composite Index, which is an index composed of a representative sample of 100 emerging market companies deemed by Dow Jones to be leaders in each of 10 sectors.

Things to Know

• Brazil is the top country, with 24.9% of the weighting. China has 24.3%, Russia has 13.4% and India has 13%. Other countries include Mexico, South Africa, Chile and Indonesia.
• Oil and gas is the top sector, weighted at 30.8%; financial is 22.1%; telecommunications is 11.6%; and basic materials is 9.3%.
• The expense ratio is 0.75%.
• EEG is a relative newcomer on the ETF scene – the fund launched on July 22.

The Latest News

• Emerging Global Advisors CEO Bob Holderith feels that interest in emerging markets should continue to expand. “It’s a 25-year growth story in its sixth year.” The positive growth outlook for emerging markets goes hand-in-hand with the changing demographic picture in these countries.
• Holderith notes that in most of these countries, there’s a huge young population, all looking for the “Western experience”: cell phones, iPods, dining out and more. (More on Emerging Global Advisors).
• Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy.
• Emerging markets already account for one-third of the global GDP and 10% of the world’s market capitalization.

According to the National Treasury forecast, South Africa’s economy is expected to grow 1.5% next year as consumer spending and investment increase and infrastructure projects get under way, report Nasreen Seria and Mike Cohen for Bloomberg. Growth will likely average 2.5% over the coming years. For 2009, the economy is projected to contract 1.9%. (Reasons to keep an eye on South Africa).

Other areas forecast to grow next year include:

• The recent recession has pushed the country’s deficit to 7.6% of GDP in the year through March, but the Treasury expects it to ease in the coming years. The Treasury estimated that consumer spending will expand 0.9% in 2010 after contracting 3.1% this year.

• The government is pessimistic about growth forecasts, citing lower global demand for South African goods in the near term. Exports are forecast to grow 3.8% in 2010 after contracting 19.8% this year, while imports are projected to expand 4.2% following a 20.3% drop in 2009.

On the downside, South Africa still faces challenges:

• South Africa is struggling with an AIDS Pandemic, massive poverty and unrest because of public service cutbacks, comments Danny Schechter for The Market Oracle.

• The country has lost 500,000 jobs, tax revenue has diminished but expenditures are still high.

Schechter sees that the financial crisis stemming from the United States should be examined to ensure that South Africa won’t be caught in the same situation again. He suggests the country needs to turn more inward to attain a self-sufficiency in order to shield the economy against external forces. (How regulations helped  South Africa).

For more information on South Africa, visit our South Africa category.

• iShares MSCI South Africa Index Fund (NYSEArca: EZA): up 43.6% year-to-date

Max Chen contributed to this article.

• The country’s purchasing managers’ index rose the most in 17 months, reports Nasreen Seria of Bloomberg. The seasonally adjusted index increased to 48 last month from 39.3 in August. This is huge for South Africa, because manufacturing production accounts for 14% of its economy.
• The sub-index, which measures business activity, jumped to 49.4 last month from a 38.3 in August.
• New sales orders rose to 50.7 from 39.5 and manufacturers are starting to increase their inventories.
• The pace of job cuts may have also eased with the unemployment sub-index rising to 42.7 from 37.5 in August.
• The nation’s currency has been gaining ground on the dollar, surging 39% since March. The WisdomTree Dreyfus South African Rand (NYSEArca: SZR) is up 33.8% year-to-date.

South African state-owned companies may increase bond sales to finance more than $78.5 billion for infrastructure expansion over the next five years as government revenues were hit hard in the recession, reports Garth Theunissen of Bloomberg.

To grab direct exposure to South Africa, take a look at the iShares MSCI South Africa Index Fund (NYSEArca: EZA), which is up 43.4% year-to-date. (For more ways to get exposure to Africa, go here).

For more stories on South Africa, visit our South Africa category.

Kevin Grewal contributed to this article.

South Africa was not overwhelmed by the financial crisis because of investments that adhered to the country’s high level of self-regulation as well as its limited exposure to experimental or risky asset-backed securities, according to etfexpress.

Ian Hamilton, chief executive of hedge fund administrator Investment Data Service Group, claims that other factors supported the country, as well:

• The banking system did was not exposed to sub-prime mortgages and other poor investment products
• Hedge funds did not have a lot of foreign investors that could have withdrew money in a crisis
• Hedge funds were not highly leveraged

A majority of investors in South Africa rely on institutional investments, especially pension funds, and on long-term investment strategies that use portfolio diversification. The ability to deliver returns while keeping risk at a minimum has raised the South Africa hedge fund industry’s profile in the domestic and foreign markets.

A rising level of investor interest may cause some problems in the future, though: The industry will have to maintain a level of managers with the right amount of talent. Managers will also need to diversify their client base to obviate the potential exodus of cornerstone investors. The industry could also face a medium-term growth trend that will not be as bedazzling as previous years.

• iShares MSCI South Africa Index (NYSEArca: EZA): up 51.8% year-to-date

For more information on South Africa, visit our South Africa category.

The company’s newest ETF, the Dow Jones Emerging Markets Financial Titans Index Fund (NYSE Arca: EFN) will be the first ETF to provide sector-based exposure to the largest emerging markets companies in banking, insurance, real estate investing and financial services.

EFN seeks to track, before fees and expenses, the performance of the Dow Jones Emerging Markets Financial Titans 30 Index, which includes 30 of the largest emerging markets financial companies in banking, life insurance and non-life insurance and real estate.  The ETF will enable investors to grab exposure to 10 different companies investment and services and financial services.

As of Sept. 11, the top five countries represented were China (39.7%), Brazil (22.9%), India (13.2%), South Africa (9.3%), and Malaysia (4%).  What’s great is that Emerging Global Shares is no stranger to sector-based emerging market funds.  In fact, EFN will be the fourth ETF in the family of ETFs introduced by Emerging Global Advisors.

For more stories on emerging markets, visit our emerging market category.

Kevin Grewal 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.

South Africa’s GDP has contracted an annualized 3% from the from the first quarter, while growth dropped 6.4%, which officially made this the country’s first recession in 17 years, writes Robb M. Stewart for The Wall Street Journal.

President Jacob Zuma vowed to create 500,000 jobs this year and fight poverty. This statement comes after mining companies and manufacturers cut thousands of jobs and spending. In July, jobless rates inched up to 23.6% in the second quarter as 267,000 became unemployed and 302,000 gave up on looking for work.

Consumer price inflation dropped to 6.7% from 6.9% last month, but still remains above the Central Bank’s target range, reports Robb M. Stewart for The Wall Street Journal. The Reserve Bank reduced its repurchase rate 0.50%, to 7% earlier this month and has a target inflation rate of 3% to 6%.

According to iStockAnalyst, South Africa will eventually pull through to become “one of the big five emerging markets.” Why?

• South Africa has a stable political climate and financial sector
• The government is putting $98 billion in infrastructure
• Increases in the country’s product-based economy
• The country remains a big transport center for the majority of the world’s oil
• South Africa is one of the last to be affected by the global downturn, which means a recovery is only beginning

• iShares MSCI South Africa Index (EZA): up 39.8% year-to-date

For more information on South Africa, visit our South Africa category.

Max Chen contributed to this article.

Much of the recent spike in commodity prices has been driven by a weaker greenback. But David Bogoslaw for BusinessWeek asks whether now is the time to bet on commodities. He notes that it’s going to take some examination of economic signals, both good and bad, to answer the question:

• China has been a big driver of global commodities demand for the last decade. China is said to be scaling back on its consumption of commodities as they rein in their stimulus, which has sparked fears that this could depress prices.
• Renewed demand for cars, thanks to the very successful “Cash for Clunkers” program, as well as a recovery in housing, may help sustain demand for certain commodities domestically.
• The direction of the dollar is a key driver. If the dollar continues to weaken, as some feel it might, this could make commodities more affordable for overseas buyers.
• Mining strikes could deplete inventories. One mine that accounts for a third of South Africa’s platinum production may go on strike this week; a strike in Canada is being blamed for the spike in nickel costs.

Agriculture is still a popular segment of the commodity market. Even if China backs off on spending, the country’s citizens could still demand food as much as they were before, one analyst notes. Meanwhile, soybeans are poised to hit a record $20 a bushel as stockpiles in the United States dwindle, report Claire Leow and Susan Li for Bloomberg.

The fracas over futures-based commodity ETFs continues as iShares S&P GSCI Commodity Index Trust (GSG) said it would stop issuing new shares once it hit 55.9 million. Currently, there are 52.5 million shares, reports Ian Salisbury for Dow Jones Newswires.

GSG joins a growing line of funds that have said they’ll stop issuing new shares until the CFTC officially rules on what kinds of caps it would impose on these funds.

Whether it’s time to get into commodities or not, watch the trend lines for signals. Our strategy utilizes the 200-day moving average when looking for opportunities and potential long-term uptrends. Read more on our strategy here.

Most recently, the Swiss government agreed to hand over private bank information of 4,450 American UBS clients to American regulators, putting a damper on Swiss banks’ secrecy policies.  As a result, Swiss private bankers are turning their attention to emerging markets, such as Russia, Asia and the Middle East, stressing their expertise and financial stability, states Ghana Business News.  The litigation and controversy is damaging the reputation of Swiss banks and is forcing the nation to draft up new treaties.

In addition to this, it appears that investors from Europe, South Africa and Asia are the first to gain inquiries in equity participation for international banks that are in trouble.  Some big names like the Commercial Bank of China have gone so far as to hire accounting firms to run forensic audits on the international banks.

A combination of the aforementioned can truly be detrimental to the global financial sector.  An ETF that could be influenced is the WisdomTree International Financial Sector Fund (DRF) which is up 31.9% year-to-date and above its 200-day moving average.

• iShares MSCI Switzerland (EWL): up 10.1% year-to-date; UBS 5.6%

For more stories on the financial sector, visit our financial category.

Kevin Grewal contributed to this article.

Shushmul Maheshwari of RNCOS states that banking assets in the South African region are expected to increase by 18.7% between 2009 and 2013.  The reasons include:

• Banks in the country continue to lend despite the economic meltdown
• The demand for credit by the corporate sector picked up considerably in an attempt to increase production capacity and inventories to meet growing demand
• The demand for credit by the corporate sector has been and is continuing to increase because of an increase in fixed investment and infrastructure spending
• The sector has been protected from effects of the global financial crisis and is expected to enjoy high profitability because it has restrained itself from investing in high-risk securities.

As for the future of the South African financial system, Maheshwari believes that it lies in personal banking and small and medium-sized business loans.

On the flip side, there are some risks to watch out for when investing in Africa, says Ed Cropley for Reuters:

• South Africa’s new president is straddling a line  between promises he made to trade unions, leftists and residents of poor townships and promises he made to foreign investors. He’s being closely watched.
• It’s wage negotiation season, which is especially tense this year because inflation is falling and it’s the country’s first recession in 17 years.
• There could be walkouts at state power producer Eskom, which could trigger power outages. Last year, the mining sector was vexed by these outages and production was severely disrupted.

• iShares MSCI South Africa Index (EZA): which is up 26.8% year-to-date; 25% of assets are in the South African financial sector

• SPDR S&P Emerging Middle East & Africa (GAF): which is up 30% year-to-date; 60.4% of assets are focused in South Africa

• Market Vectors Africa ETF (AFK): which is up 29% year-to-date

For more stories on South Africa, visit our South Africa category.

Kevin Grewal contributed to this article.