Thanks in large part to rising precious metals prices, the iShares MSCI South Africa ETF (NYSEArca: EZA) is up 27.5% year-to-date, good for one of the best performances among all single-country emerging markets exchange traded funds.
EZA has been accruing that impressive year-to-date showing in the face of lingering concerns that one or more of the major credit ratings agencies would downgrade South Africa’s sovereign debt rating to junk status. Africa’s second-largest economy appears to have dodged that concern, at least for now.
Related: South Africa ETF Deals With Credit Risks
Earlier this year, Standard & Poor’s reiterated a BBB- rating, the lowest investment-grade rating, on South African sovereign debt. In May, Moody’s Investors Service surprised global investors by actually upgrading its rating on South Africa to two levels above junk territory.
Now, there are new concerns for South African equities stemming from the country’s recent elections.
[related_stories]“While official results were not expected until Saturday at the earliest, Brown Brothers Harriman says ANC is likely to “swing more populist” to boost support ahead of the 2019 national elections. ANC support appears to have fallen below 60% for the first time ever: 54.7% versus 62.2% in the 2014 national election, while DA support increased to 26.6% from 22.2% in 2014, BBH notes,” reports Dimitra DeFotis for Barron’s.
The country is a major gold producer as well as being as one of the top two producers of palladium and platinum in the world. South African miners have been enjoying improved margins due to a surge in prices on raw materials like iron ore and platinum while the rand currency depreciated against the dollar.
Many still believe South Africa’s economy has its work cut out for it as the government tackles high unemployment and high debt. Credit agency Fitch recently downgraded South Africa to just one notch above speculative-grade status and stated that the dismissal of Nene had “raised more negative than positive questions.”
Related: Soaring Gold, Silver, Platinum ETFs Power Up
“ANC has been in the driver’s seat since coming to power in 1994, and President Jacob Zuma and his administration have been hounded by corruption investigations, and this was an anti-Zuma vote, experts quoted by the FT say. South Africa’s socioeconomic divisions are wide and the economy is nearing recession,” according to Barron’s.
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iShares MSCI South Africa ETF
