ETF Trends
ETF Trends

Africa could soon be a player within the exchange traded fund (ETF) market. Standard & Poor’s Indexes has launched three new indexes and benchmarks spanning the continent.

HedgeWeek gives the rundown:

  • S&P Pan Africa Index covers 12 African markets: Botswana, Cote d’Ivoire, Egypt, Ghana, Kenya, Mauritius, Morocco, Namibia, Nigeria, South Africa, Tunisia and Zimbabwe
  • The S&P Africa Frontier Index covers eight smaller frontier markets from sub-Saharan Africa, Botswana, Côte d’Ivoire, Ghana, Kenya, Mauritius, Namibia, Nigeria and Zimbabwe.
  • The S&P Africa 40 Index is designed to offer tradable exposure to 40 of the most liquid companies operating primarily in Africa. They must be domiciled there.

The S&P Africa 40 is dominated by companies from the financial, materials, telecommunications and industrials sectors, with MTN Group (South Africa), Orascom Construction (Egypt), First Quantum Minerals (Zambia) and Standard Bank Group (South Africa) among the largest constituents.

The indices aim to capture 80% of the total market capitalization of each country and provide a comprehensive benchmark for African markets. Now, when will an ETF for those indexes come along?

Exposure to Africa (and the Middle East) can currently be had through the SPDR S&P Emerging Middle East and Africa (GAF). South Africa has the most exposure in the fund, with 55.3% of assets. Morocco has 7.1%, Egypt has 5.7% and Jordan has 3.6%. There’s also the iShares MSCI South Africa (EZA), down 6.1% year-to-date.

HedgeWeek reports  that Dr. Ayo Salami, Director of African Business Research, feels the future of fund investment in Africa is great. He says investors who take on Africa early will be the ones to really reap the benefits because there is so much room to grow on the continent.

Salami says Africa stands to benefit from its markets being uncorrelated with those in North America and Europe.

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.