Time to Jump Into South Africa?

The South African Reserve Bank (SARB) has cut interest rates by 100bps, inline with market expectations, but the near term impact on the FX and rates markets is likely to be limited.

Much of the move was factored into the market in recent days, following and awful Q1 GDP release (falling 6.4% and pushing the country into a recession), but it continues to reinforce the idea that South Africa is an very interesting domestic market.

Most exposure in the index is materials, though banks and domestic retailers are also prominent. The MSCI South Africa Index (EZA) ETF is great exposure to South Africa, but also look at the following heavy gold and mining players: Barrick Gold Corporation (ABX), Gold Fields Limited (GFI), Harmony Gold Mining Company (HMY).

Local costs are in South African Rand which has been devalued over the last few months, but the export revenues are in U.S. dollars, so profit margins are sky high.

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View the full EZA chart at Wikinvest