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South Africa ETF Drops as Rand Hits Four-Year Low


The iShares MSCI South Africa (EZA) is down 15% the past month and one of the worst-performing ETFs in the truly ugly emerging markets category.

EZA, which doesn’t hedge its foreign currency exposure, has been hurt by a weaker rand.

“South Africa’s rand fell more than 1.5% against the dollar on Tuesday to a four-year low and stocks tumbled, as a global sell-off of commodity-linked currencies and emerging market assets intensified,” Reuters reported.

The rand is down nearly 18% against the U.S. dollar so far this year.

“Foreign investors are starting to vote with their feet, as the bond market sell-off and sharp depreciation of the rand so clearly illustrate,” newspaper Business Day said Monday.

Labor unrest and strikes in South America’s mining sector have also punished EZA.

Meanwhile, in bonds, yields spiked Tuesday along with several other emerging market countries. Also, the cost of insuring South Africa’s debt against default also rose to a 17-month high, Reuters reports. [Is the Party Over for Emerging Market Bond ETFs?]

Investors have dumped emerging market bonds and currencies since the Federal Reserve first hinted it may begin tapering its stimulus measures. [Emerging Market Currency ETF Falls]

EZA was down nearly 2% in U.S. trading Tuesday.

iShares MSCI South Africa

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.