Trouble Lurks For This Emerging Markets ETF

Weighing on South Africa’s growth outlook, consumers are growing cautious as the country suffers through high debt, a record 26% unemployment rate and electricity shortages. Inflation has been rising after a drought in the south pushed up food prices. Additionally, oil prices have been rebounding.

“South African equities have outperformed within EM, but this appears unsustainable. MSCI South Africa was down only -1.9% in 2015 vs. -16.6% for MSCI EM. Equities are already starting to perform a bit worse in 2016, as MSCI South Africa is down -8.3% YTD vs. -9.5% YTD for MSCI EM. Our EM Equity model has South Africa right at the bottom of our league table as VERY UNDERWEIGHT,” according to Brown Brothers Harriman.

iShares MSCI South Africa ETF