Africa ETF: The New Frontier

Jul.16.08 | About: VanEck Vectors (AFK)

Are you ready for the new Frontier? No I am not talking about the next administration but rather the new Van Eck Market Vectors – Africa ETF (NYSEARCA:AFK). AFK seeks to track the Dow Jones Africa Titans 50 Index [DJAFK], a pan-African index that measures the stock performance of 50 companies that are headquartered in or generate the majority of their revenues in Africa.

AFK is taking a beating in markets today - down 4%.

Market participants have either direct or indirect exposure to the following 11 markets in Africa: Angola, Democratic Republic of the Congo [DR Congo], Egypt, Equatorial Guinea, Ghana, Kenya, Mali, Morocco, Nigeria, South Africa and Zambia.

The index caps each country at 25% exposure upon quarterly rebalance, with top country allocations to Nigeria (25%), South Africa (25%), Egypt (13%) and Morocco (11%). Offshore-based companies also account for 25% as of the most recent rebalance. The investment is broken down among a number of different sectors; the largest include financials (40%), basic materials (18%), oil & gas (13%), telecommunications (10%), industrials (8%) and technology (7%).

According to a recent Goldman Sachs report, the number of people living on incomes of less than $1,000 dollars a year ($2.75 a day) has already dropped significantly from about 50% of the world’s population in the 1970s to 17% by 2000. According to the report's findings, it could be as low as 6% by 2015.