World Spotlight on South Africa – Next Up Brazil

Several years ago I read Goldman Sachs’ research paper on the economic potential of the BRICs (Brazil, Russia, India and China).  Since then I have devised different investment strategies to capitalize on this trend. Search my archives for numerous posts on this topic. Recently two additional catalyst have caused me to shift my focus primarily to Brazil – 2014 World Cup and 2016 Olympics.  With the World Cup kicking off this weekend its a good time to look at how this year’s host, South Africa, has benefited from the games.

The following is from Frank Holmes Weekly Investor’s Alert:

  • World Cup will generate 400,000 jobs and contribute $7.3 billion to the country’s GDP
  • 450,000 tourists will visit the country spending a total of $1.1 billion
  • $2.2 billion was spent on 10 stadiums that will host the matches
  • $9.1 billion was invested in road systems, $2.4 billion in airports and $2 billion on a new commuter rail

That’s all fine and dandy, but how can investors benefit from this goodness?  Let’s take a look at South Africa’s stock market performance.

Notes:

  • EZA is an ETF of publicly traded securities in the South African equity market
  • 252 is average number of trading days in a year

Nothing too exciting.  EZA tracked the S&P 500 over the past year.  It gets a little more interesting with a larger look back period.

EZA outperforms a little over 15% over a two year period.  Finally, since it is 4 years before the Brazilian World Cup let’s extend the look back period to 4 years.

A 30% out performance over 4 years ain’t bad.  I expect more is possible in Brazil with the Olympics following 2 years after the World Cup.  The Brazilian Small Cap ETF (BRF) and VALE, one of the world’s largest miners, remain my favorite ways to play Brazil ( tweets, tweets, tweets).

BRF is recovering from a pounding in May.  Now may be a good time to place a few chips on Brazil in your long term accounts.  I plan on throwing a few bucks its way every time it approaches the 200 DMA.

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