Ebola and African ETFs

The Ebola outbreak has been ravaging West Africa for some time, however the second confirmed case in the U.S. has now gotten the world’s attention. Only one person has died from the disease on U.S. soil, however it has claimed over 4000 lives around the world, specifically in Africa, according to the World Health Organization. That is out of the 8400 probable or suspected Ebola cases reported.

The affect the disease is having on the economies of West African nations plagued with Ebola has been evident. But if the disease is to spread to larger nations such as Nigeria it could have a devastating ripple affect. It is important to take a look at the ETFs with the closest exposure to the region and how they have been affected by the Ebola outbreak.

The Market Vectors Africa ETF AFK consists of 114 of the largest companies in Africa across eight industries. The largest weight being in financials at 42 percent and energy with 18 percent. The largest individual holdings include Commercial International Bank Egypt Sae at 8.8 percent, Guaranty Trust Bank Plc with a 5.3 percent holding, and Zenith Bank Plc making up 4.3 percent of the portfolio.

Egypt and South Africa make up 40 percent of the ETF and the disease has not directly affected either country. However, Nigeria is geographically close to where the outbreak is most rampant and the country accounts for 17 percent of the allocation. Sierra Leone, which has been hit hard, makes up a mere 0.3 percent.

AFK is down 3 percent over the last 12 months and down 6 percent over the last six months. Since the Ebola epidemic began in the beginning of September the fund has fallen almost 12 percent. It is unclear what toll the deadly disease will ultimately take on the continent, so there is no bottom in sight at the moment for AFK.

The Global X MSCI Nigeria ETF NGE follows 25 of the largest publically traded companies in Nigeria. NGE is a very consolidated ETF with the top four holdings making up 46 percent of the entire fund. Those top holdings are Nigerian Breweries PLC at 17 percent, Guaranty Trust Bank PLC at 11 percent, Zenith Bank Limited 9 percent, and Nestle Nigeria PLC making up 8 percent of the portfolio.

The fund is down 2 percent over the last year and 1 percent over the last six months. Nigeria has been affected by Ebola, but not nearly to the degree that other West African countries have been. That being said, as long as the death toll continues to rise in the surrounding countries, Nigeria will feel the affects.

The iShares MSCI South Africa ETF EZA tracks 52 companies in South Africa across eight industries. The heaviest weighted industries being financials with 28 percent and consumer discretionary at 24 percent. The top weighted individual holdings include Naspers Limited N LTD at 15 percent, MTN Group LTD making up 12 percent of the ETF, and Sasol LTD at 10 percent. EZA is down 3 percent over the last 12 months as well as the last six months. Since the outbreak began in the beginning of September the fund has slid 9 percent despite South Africa being one of the farthest points on the continent from the highly infected areas.

Even though the ETFs do not have a large exposure to the nations that are suffering the hardest with the Ebola breakout, there is obvious concern among investors that it could spread throughout the continent. At some point the outbreak will be slowed and a great opportunity will present itself for investors looking ahead at the growth potential of the African nations.