How To Access Black Monday's Best-Performing Market (If You Dare)
August 24, 2015 will be remembered as another rendition of Black Monday as equity bourses the world over plunged. Things were so bad that various headlines implied the Dow's nearly 600-point tumble was not so bad when considering the blue-chip index opened down by 1,000 points.
Well, there were a few winners and Monday's big winner among global equity markets was, drum roll please… the Nairobi Securities Exchange, the major equity index in Kenya. Stocks in Africa's ninth-largest economy climbed nearly 2.5 percent.
Although there is not a dedicated Kenya exchange traded fund listed in the US, daring investors can access Kenyan stocks via several U.S.-listed ETFs. That is if you are a believer that Monday's temerity is a sign of things to come for Kenyan stocks. Remember, Nairobi Securities Exchange would need to gain more than 33 percent from Monday's close to hit its 52-week high.
Related Link: The Biggest Losers From Monday's Market Meltdown
The Guggenheim Frontier Markets ETF (NYSE: FRN) has an almost 9.8 percent weight to Kenya, placing the African nation just behind, interestingly, the US in FRN's lineup. That makes Kenya FRN's sixth-largest country weight.
There was a time that FRN did not have much of a frontier feel to it as it was home to more emerging markets than markets with the frontier classification. That has changed as FRN is most a frontier fund if one can look past a more than 13 percent combined weight to the US and UK Kenya cannot, nor has it carried the day for FRN.
The ETF allocates almost 30 percent of its combined weight to Kuwait and Nigeria, two members of the Organization of Petroleum Exporting Countries. That is not a positive trait when oil prices are tumbling. FRN's largest individual holding is an 8.4 percent allocation to the Market Vectors Vietnam ETF (NYSE: VNM). Add to that, FRN has an almost 5 percent weight to Kazakhstan, meaning the ETF has significant exposure to recent currency devaluers.
Home to $502.6 million in assets under management, the iShares MSCI Frontier 100 ETF (NYSE: FM) is the largest frontier markets ETF. FM is also home to a 6 percent weight to Kenya, making the country the ETF's fifth-largest country weight. Like FRN, FM has OPEC and currency devaluation problems. Kuwait and Nigeria, the latter of which has also devalued its currency, combine for almost 39 percent of FM's weight while Vietnam and Kazakhstan combine for another six percent.
The Market Vectors Africa Index ETF (NYSE: AFK) has a 3.3 percent weight to Kenya, which probably is not a coincidence because AFK is weighted by GDP and that puts Kenya in the ninth spot in AFK's lineup Then again, four of the countries ahead of Kenya on AFK's roster are the UK, France, the Netherlands and Canada.
AFK's methodology is not perfect. Either that or the ETF is not recognizing Nigeria's new way of calculating its GDP, which made it the largest African economy. South Africa, previously Africa's largest economy; and Egypt. North Africa's biggest economy; are AFK's top two country allocations with a combined weight of almost 44 percent.
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