The South African economy is still weak, but the appointment of new government leaders could keep the markets, along with subsequent exchange traded funds (ETFs), on the right course.

South Africa’s government policies won’t be drastically changed as Pravin Gordhan becomes the new Finance Minster and Trevor Manuel is now head of  a planning commission, reports Nasreen Seria for Bloomberg. The financial markets are relieved after hearing about the appointment of Gordhan, who previously tripled tax collection in a decade as head of the South African Revenue Services.

It may still be too early to consider raising South Africa’s credit rating since the economy is projected to contract for the first time in 17 years with high unemployment rates.

The South African rand depreciated against the dollar after news of a change in the Finance Ministry and on possible ongoing slowdowns in the economy, write Janice Kew and Garth Theunissen for Bloomberg. It is also thought that the rand will further depreciate based on fundamental reasons.

A report is due to come out in which the manufacturing sector, which is 16% of South Africa’s economy, may have continued to drop on diminished demand for vehicles and commodity goods.

  • iShares MSCI South Africa Index (EZA): up 12.7% year-to-date

ETF EZA

  • WisdomTree Dreyfus South African Rand (SZR): up 15% year-to-date

ETF SZR

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.

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