A recent article from KraneShares, see our summary Is Your Emerging Market Strategy Overexposed to These 3 Factors? (KraneShares), outlined three factors which, according to their thesis, should mean a poor performance for emerging markets like South Africa and specifically the MSCI South Africa Index along with the iShares MSCI South Africa Index ETF (NYSEARCA: EZA) which tracks the index. However, the South Africa index / ETF has actually performed better than many other emerging market countries over the past five years and has even outperformed the iShares MSCI Emerging Markets Index ETF (NYSEARCA: EEM):
KraneShares explained this outperformance can be attributed to Naspers Limited (JSE: NPN; OTCMKTS: NPSNY), a giant South African media conglomerate that is the largest listed company on the Johannesburg Stock Exchange. Naspers happens to hold a 34% stake in China based and Hong Kong Listed Tencent Holdings Ltd (OTCMKTS: TCEHY; OTCMKTS: TCTZF), one of the largest Internet companies in the world. KraneShares noted:
From April 30, 2010 to April 30, 2015, Naspers returned 307% driven by the strong performance of Tencent’s stock on the Hong Kong Stock Exchange. Over this time period Naspers contributed 20% of the MSCI South Africa Index’s 43% return. South Africa is an exception to our thesis because nearly half of its return was actually driven by Tencent– a company that trades 6,600 miles away in Hong Kong.
Here is a look at Naspers Limited’s performance verses that of the iShares MSCI South Africa Index ETF and the iShares MSCI Emerging Markets Index ETF:
In fact, Naspers Limited has even outperformed Tencent Holdings Ltd (HKG: 0700):
In other words and before you select a country or country ETF that appears to be an outperformer, its important to take a much closer look at what might actually be driving that outperformance.
To read the whole article, Is Your Current Emerging Market Strategy Overexposed to These 3 Factors?, go to the website of KraneShares. In addition, check out our South Africa ADR list and our South Africa ETF list.
- South Africa Stocks “Expensive Within Emerging Markets” (Moneyweb.co.za)
- South Africa’s Economic and Potential Downgrade Woes (Bloomberg)
- Mining’s Iron Grip on the South African Economy (Reuters)
- Brutal Competition Batters Supermarket Stocks the World Over (The Guardian)
- Is Your Emerging Market Strategy Overexposed to These 3 Factors? (KraneShares)
- China’s Gung-ho Foray Into Africa Gets a Reality Check (Bloomberg)
- Business Day TV Daily Stock Picks (July 2023)
- Results of MSCI 2017 Market Classification Review (MSCI)
- Income Ideas From Emerging Markets (Institutional Investor)
- Investing in Hong Kong ETFs / Hong Kong ETF List
- How Big is Africa’s Car Market? (African Executive)
- South Africa: Too Soon to Jump for Joy (BNP Paribas)
- Downgraded Countries Were Top Emerging Market Performers in 2016 (IOL)
- Emerging Market Acronyms Like “Fragile Five” are Misleading and Unhelpful (SCMP)
- “Fragile Five” Emerging Markets No Longer That “Fragile” (AP)