Buy Africa On The NYSE

There is now an African Exchange Traded Fund (AFK) on the NYSE. It launched in July last year but I only found about it after receiving a prospectus from my stock broker in the mail last week. According to the prospectus, the fund's objective is to replicate as closely as possible, the price and yield performance of the Dow Jones Africa Titans Index.

This index was also launched last year and covers 11 markets; Angola, Democratic Republic of the Congo (DR Congo), Egypt, Equatorial Guinea, Ghana, Kenya, Mali, Morocco, Nigeria, South Africa and Zambia. The index is weighted by float-adjusted market caps with each country’s weight is capped at 25% and individual components capped at 8% with a maximum of 15 companies per country.

Companies in the index must also have a minimum market cap of $200 million and a minimum three-month average daily trading volume of $1 million. The only information I could find about its composition was dated February 23rd, 2008 and South African companies dominate the Index with 15 companies.

The only Kenyan company then is Equity bank but there is a possibility that Safaricom has not yet included in the Index because Dow Jones has the habit of not updating its Indexes. A good case is GM which is still a component of the Dow Jones Industrial Average despite the fact that the stock has been trading at multi-year lows and is headed into oblivion.

The ETF is heavily weighted towards Industrial Materials (29%), Energy (10%), Telecommunications (14%) and financial services (32%). The funds holdings are a paltry $7.5 million compared to the average medium sized growth fund with $1.3 billion worth of stock.

On the brighter side, the advisers of the fund have waived 2.27% of the 3.15% expense fees till the 1st of May, 2010. And unlike mutual funds, there are no sales or redemption charges or minimum initial and subsequent investment.

As someone who is interested in diversifying my portfolio, I have added this ETF to my watch list and will be researching more into it with a view of buying into it.