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South Africa ETF vs. Gold


We have recently seen bullish looking options and fund flows in SPDR Gold Shares (GLD) and and a related ETF, i Shares Gold Trust (IAU).

The gold ETFs were down nearly 2% Wednesday morning on talk of a “fat finger” trade in gold. [Gold ETF Slides]

One country specific ETF that is highly reliant on the performance of Gold/Precious Metals Mining related equities is iShares MSCI South Africa (EZA).

Appearing among the top ten weightings in the fund are names including Anglogold Ashanti Limited, Impala Platinum Holdings, and Gold Fields Ltd. There are currently 52 individual equity names represented in the underlying basket of EZA.

From a sector standpoint, this individual country ETF is weighted towards the following industry sectors (Communication Services, 21.99%, Financial Services, 19.69%, Basic Materials 18.82%, and Consumer Discretionary, 12.06%), with lesser weightings to sectors such as Energy, Industrials, Consumer Staples, and others.

Year to date, EZA has lagged the broader MSCI Emerging Markets Index, up 5.46% versus the benchmark rallying 8.03% during the same time period. However, EZA has provided a relative safe haven in the context of Emerging Markets countries in the trailing five year period, as the ETF is down only 7.70% versus the MSCI Emerging Markets Index losing 16.48% during this timeframe.

We suspect that EZA is not necessarily a household name simply because not every portfolio manager currently has exposure to the South African equity market, but the fund will soon celebrate its tenth anniversary (February of 2003 inception).

EZA averages about 382,000 shares on an average daily basis, so it is clearly on many institutional radars, and there is ample underlying liquidity in the fund via its underlying equities in order to trade the fund in larger size.

iShares MSCI South Africa

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.