South Africa, one of the big five emerging markets, is primed for investors. The political climate has never been more stable than it is now. The government is spending $98 billion on infrastructure. The financial sector is surprisingly stable. As much as the South African Reserve Bank lowers interest rates, consumer spending remains unchanging. Rather than being a consumer-driven economy South Africa thrives on a product-based economy. Materials production is at its highest. South Africa’s ports help transport the majority of the world’s oil. Now is the perfect time to invest in this rising economy. Especially taking into account the fact that South Africa was one of the last areas to feel the effect of the global economic downturn, which means that the economic recovery in South Africa is just beginning. South Africa is primed for investors.
My picks for investing in South Africa are as follows:
Highveld Steel and Vanadium (HSVLY)
This South African small-cap steel company outperforms the industry average at almost every turn. Its three-year average EPS growth is 167.2 compared to the industry average of 23.2. Plus, you can be sure there are great times ahead for this stock as South Africa has just barely begun recovery. Materials production is a big portion of this emerging market’s economy. With a current price of $9.60 this pick is a valuable low-cost addition to the well thought-out portfolio.
iShares MSCI South Africa Index Fund (EZA)
The majority of this ETF’s holdings come from materials and financials, two things that have a stable future in South Africa’s emerging economy. This fund offers consistent growth without abundant risk. 100% of this fund’s holdings are directly from South Africa. EZA boasts a total YTD return on NAV of 31.65% and on share price of 31.89%, which makes this a highly recommended intermediate-term holding. It also speaks well for this ETF that it trades relatively close to the actual value of the fund.
WisdomTree Dreyfus South African Rand Fund (SZR)
With minimal consumer spending, the South African Rand is relatively unsusceptible to fluctuations in exchange rates. This fund has yielded consistent growth since its inception in 2008. This currency is slightly less volatile than EZA, which makes this currency ETF well-suited for long-term holding. The YTD total return on NAV is 23.02% and on share price is 25.94%. Not as large as EZA’s returns, but plenty of room for long-term growth.
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