Naspers’ Tencent Stake Drives the MSCI South Africa Index’s Returns (KraneShares)
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.
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- China Internet Flash Report: 2015 & Beyond + an Overview of 2014 Results (KraneShares)
- China’s Gung-ho Foray Into Africa Gets a Reality Check (Bloomberg)
- Results of MSCI 2017 Market Classification Review (MSCI)
- Mining’s Iron Grip on the South African Economy (Reuters)
- Investing in Hong Kong ETFs / Hong Kong ETF List
- Key Findings: Credit Suisse Emerging Markets Consumer Survey
- How Does Tencent Compare With World’s Tech Titans? (Forbes)