Mary Daniel's  Instablog

Let me just start out by saying that there are truly many reasons not to invest in Africa.  The political landscape is far from stable.  Corruption is on at a full 360 degrees.  The continent is rocked with conflict without rest.  Infrastructure is pretty much non-existent.  However, similar to the Middle East, Africa has unparalleled quantities of potential.  This is the side of Africa that gets less press.  The side that is full of hopeful, enterprising people who are confident of a better future.  This is the Africa that is home to some of the most attractive potential investments in the world today.  Africa is the fastest growing continent and the richest in terms of resources.  It is prime for investing.

Even with the great investment potential that exists here, it is difficult to invest in the majority of the smaller countries within this continent through the U.S. stock exchange system.  This is where ETFs come in very handy.  One great fund, the PowerShares MENA Frontier Countries Portfolio (PMNA), is invested in Morocco and Egypt, among others.  The Fund may invest at least 80% of its total assets in securities of companies that are domiciled in or principally traded in a Middle East or North African frontier country.  The index included 67 companies with market capitalizations between $243 million and $10.4 billion.

Up 1.22% today alone, this fund has a large growth potential.  34.7% of this fund's assets are applied to the top 5 holdings, which include Arab Bank, Mobile Telecommunications Company, Maroc Telecom, Emaar Properties, and Orascom Construction Industries.  This indicates a modestly diversified fund holding real estate, telecommunications, finance, and development.  I would prefer not to see 2 telecommunications holdings in the top 5 companies.  However, telecom companies have been performing quite well lately.  The fund is currently being sold at a 0.07% premium.  Just what I like.  From my perspective, the closer a fund trades to NAV, the less room it has to fall.

Another great fund is the Market Vectors Africa Index ETF (AFK).  This fund invests in Egypt, Morocco, Nigeria, and South Africa, among others.  It is also well-diversified across sectors, with its top 5 holdings being Tullow Oil, Mobile Telecommunications Company, Orascom Construction Industries, Old Mutual, and Mtn Group Limited.  The fund, utilizing passive or indexing investment approach, attempts to approximate the investment performance of the Africa Titans 50 Index by investing in a portfolio of securities that generally replicates the Africa Titans 50 Index.

This fund also trades amazingly close to NAV, currently at a 0.40% premium.  AFK is more diversified than PMNA.  Also, it pays out dividends and has much less volatile and more optimistic growth pattern.  This fund is comprised of 53 of the largest companies that drive their revenue stream from Africa.  AFK shares a similar growth pattern with the Dow Jones Africa Titans 50 Index (DJAFK), though it naturally trades much lower.  The African continent is ripe with potential.  Now is the time to invest in this emerging market.  South Africa is stable, Mugabe is virtually gone from the scene.  Not to mention the people are standing up full of hope and pride.  Now is the time to invest in Africa.

Disclosure:  No positions