While South Africa itself is an emerging market, local investors hoping to access other emerging economies have had limited options in the past. These days, we can conveniently access emerging market economies, including the economies of our neighbours, using ETFs.
Tip: We discuss the difference between developed and emerging economies in this podcast.
2017 saw the listing of the first Africa equity ETF, featured here. This ETF offers exposure to growing economies across the continent, ranging from behemoths like Nigeria to smaller economies like Botswana. This ETF and its property counterpart are gateways to formerly inaccessible economies.
Soon after, Satrix followed suit with the MSCI Emerging Markets ETF. The ETF invests in a combination of large-, mid-, and small-cap companies in emerging economies across the globe, including South Africa. This should be enough to pique the interest of investors with a higher appetite for risk.
The ETF has a strong Eastern flavour. Nearly 30% of this ETF is invested in China – an economic powerhouse that only became moderately accessible in the past few years. Tencent, the company behind Naspers’ superstardom on our own exchange, and Alibaba, the world’s largest retailer, collectively make up just under 8% of this ETF’s holdings. These companies underpin the Chinese investment, making it an attractive technology play. We spoke to Nerina Visser about the investment case for China in this article.
South Korea is the second-most represented country in this ETF at around 12%. Korean investments include Samsung Electronics and Hyundai, companies well-loved the world over. Taiwan, India and Brazil all pack a punch in this ETF, with the Indian economy representing just under 10%. Further exposure to our BRIC brothers also offer opportunities for growth for those who can stomach the ride. It is worth noting, however, that the ETF will increase your exposure to South Africa in general and Naspers in particular. If you already hold a top 40 product or RA, you might want to think twice about adding more.
It’s also worth remembering the Ashburton 1200 ETF and the CoreShares Global Dividend Aristocrat ETF already include some emerging market exposure. If you hold either of those ETFs, you might want to think about how much excitement you can stomach.
|ETF name||Satrix MSCI Emerging Markets ETF|
|Issue date||25 July 2017|
|Total expense ratio*||0.4%|
|ETF benchmark||MSCI Emerging Markets Investable Markets|
|Tax-free savings account||Investment allowed|
|ETF major holdings||Find the complete list here.|
|Performance||1 year +1.6%
Since listing +7.8%
|What we like||This ETF offers some excitement to South African portfolios.|
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