South Africa ETF - Nowhere to Go but Up?

| About: iShares MSCI (EZA)
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ETF S. AfricaSouth Africa is pulling all the fiscal and monetary tricks it has in its repertoire to fix its ailing economy and related exchange traded fund (ETF). The economic data coming out for the country may not look too promising, but there may be nowhere to go but up from this point.

South Africa, the largest African economy, is grappling with an annualized contraction of 6.4% in the first quarter and a 23.5% unemployment rate, reports Mike Cohen for Bloomberg. What’s going on?

  • Finance Minister Pravin Gordhan expects the economy to grow 2.5% to 3.5% annually for several years after the recession ends. Director-general of the National Treasury Lesetja Kganyago thinks reducing joblessness to a target of 14%, or 2004 levels, may take until to 2014 to achieve.
  • Retail sales dropped a less than expected 4.2% in May year-over-year, writes Renee Bonorchis fior bloomberg. Continuous interest rate cuts since December are thought to have contributed in halting the decline in retail sales. The benchmark interest rate currently stands at 7.5%.
  • Five of South Africa’s biggest banks reported an increasing amount of bad loans, which is impeding new lending and consumer spending.
  • iShares MSCI South Africa Index (NYSEARCA:EZA): up 24.8% year-to-date


For more information on South Africa, visit our South Africa category.

Max Chen contributed to this article.