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The 5 Hottest Emerging Market ETFs for 2014

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South Africa: iShares MSCI South Africa ETF (EZA)

emerging-market-etfs-izaContinuing the African theme, my next recommendation is South Africa via the iShares MSCI South Africa ETF (EZA)

South Africa is the largest and most developed economy in sub-Saharan Africa, and it also has the most liquid stock market. South African companies are quietly emerging as regional leaders, taking on established Western competitors. In fact, Western competitors are finding it easier to simply buy out their African competitors rather than slug it out, as was the case in Walmart’s (WMT) 2012 acquisition of South African mass retailer Massmart.

Being a collection of South African companies, you might expect EZA to be loaded up with gold miners and other resource stocks. Yet basic materials and energy combined only make up about 21% of the portfolio. Nearly 28% is invested in communications, led by regional mobile telecom provider MTN Group (MTNOY), and roughly a quarter of the ETF is invested in the financial sector. Consumer cyclicals chip in another 13%, and healthcare and consumer defensives add about 7% and 5%, respectively.

If Nigeria is a bridge too far for you, consider South Africa. It is a leading country in a region that I expect to enjoy some of the best growth rates in the world in the decades ahead. Collectively, the countries of Africa represent the last real frontier market left in the world, and the only market with the potential to offer “China-like” returns.

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