The Market Vectors Africa Index ETF is the simplest and most efficient solution for investors to gain exposure to Africa’s economic growth.
The fund has experienced a sharp drop in price since 2014, which is not at all correlated to the financial earnings of the fund’s major holdings. This has created substantially low valuation for the fund.
Moreover, the economic outlook for Africa is favorable, with overall projected growth in the country’s that the fund invests into. Demographics in this region are also favorable, as the population is growing by more than 2% and 43% of the population is younger than 15. Moreover trends of urbanization are rising, although approximately 70% of the population earns their income from agriculture.
That being said, Africa certainly has challenges ahead of it, and this fund is most appropriate for investors who are willing to take a long term horizon, and confidently hold if the fund experiences a further drop in price. Growth projections for this region have been lowered to 4.2%, with a slightly higher forecast for 2016 and 2017; this is due to concerns with the impact of low oil prices on Algeria and Nigeria, and difficulties in electricity supply in South Africa.
While fully acknowledging these threats, I still remain bullish on Africa and believe that some options listed on U.S. Exchanges, although there are not many, provide ample opportunities for investors to gain exposure to Africa’s future growth.