Musings on Markets: Herding behavior: Why, so what and what if?

Musings on Markets: Herding behavior: Why, so what and what if?

An Index and ETF with Exposure to Africa

Since this is MLK day I thought I would talk about an index that gives exposure to the African region.   One way such Index is the  "Dow Jones Africa Titans Index".  "The Dow Jones Africa Titans Index" is a pan-African index consisting of stocks trading on domestic exchanges as well as companies on international exchanges that obtain the bulk of there revenue from Africa.   As of now the local exchanges of South Africa, Egypt, Nigeria, Morocco, Kuwait and Kenya are considered.   To be considered a company must have a minimum market cap of $200 million dollars and a minimum one year trading volume of $million per day.  The most recognizable stocks to the international community may be Orascom Construction Industries the huge Egyptian construction conglomerate and Nigerian Breweries PLC.  According to Dow Jones web-site the country and sector allocations are as follows as of Dec 31 2010.

South Africa       25.70%                      Financials                  41.21%

Egypt                 20.51%                      Basic Materials          19.27%

Nigeria               16.46%                      Telecomm                 11.76%

Morocco            11.14%                      Oil and Gas               10.31%

UK                    10.01%                      Industrials                   6.52%

Canada                5.29%                      Consumer Goods       4.48%

Kuwait                4.33%                      Technology                 4.33%

US                      2.21%                      Consumer Services     2.14%

Australia              1.59%

Kenya                 1.46%

Norway               1.32%

One product that allows an investor to gain exposure to this index is the Market Vectors ETF distributed by Van Eck Securities Corporation and seeks to track as close as possible the Dow Jones Africa Titans index.   Note this particular ETF is not sponsored, endorsed or promoted by Dow Jones.   The ETF may be found under the symbol AFK.   Of course investors need to do their own due diligence as to whether this type of product is suitable for them and their own risk appetite.   More info on The Dow Jones Titans Indices may be found at the following link  http://www.djindexes.com/titans/ and info on the Africa ETF AFK can be found at www.vaneck.com.  I am sure given the explosion in ETFs that there will be other ETF's that will be created focussing on the Africa region and these may be less heavily weighted towards financials and more geared towards either Africas domestic resources lets watch and wait.

Important Disclosure

Note that ETFs are subject to a high degree of risk and in discussing this particular ETF it does not in any way mean an endorsement to buy or sell any such securities.   Investors need to do their own due diligence as to suitability of this or any other product.   ETFs may be affected by market conditions in both developed and nascent markets .  Particular risks associated with emerging market ETFs are social instability, expropriation of local companies and assets, political instability and armed conflict and insurgency.