Click to Enlarge YTD Return: -17%
The iShares MSCI South Africa ETF (EZA) is down nearly 17% so far in 2013, and it is closely tied to China because of the commodity connection these two nations share.
South Africa is one of the more developed regions on the continent but doesn’t really have enough of a service or technology sector to offset its high dependence on the mining industry.
And thanks to strikes at major miners on the continent coupled with plummeting commodity prices, it remains highly unlikely that South Africa’s economic woes are going to reverse.
The International Monetary Fund just slashed South Africa’s economic growth forecast to 2% for 2013 from a 2.8% outlook in April, and as growth forecasts continue to decline for China, you can expect that to further sap demand for commodities and mining stocks in South Africa.
Energy and chemicals giant Sasol (SSL) is a top component in the South Africa fund and one of the few stocks that is accessible on American exchanges. It has hung in there with 7% gains year-to-date — underperforming, but at least in the green. The same can’t be said for the other top components of EZA.