Global X Funds, a New York-based provider of exchange-traded funds (ETFs), has launched two pioneering new funds providing access to, until now, uncharted territory for ETFs: Nigeria and Central Asia and Mongolia.
Listed on the NYSE Arca, the Global X Nigeria Index ETF (NGE) and Global X Central Asia & Mongolia Index ETF (AZIA) are the world’s first ETFs to offer dedicated exposure to these frontier markets.
While Global X Funds becomes the first to roll out Nigeria and Mongolia-related ETFs, it may be followed shortly by Market Vectors ETFs, a division of Van Eck, which has filed paperwork with the US Securities & Exchange Commission to launch a dedicated Nigeria ETF and one tracking Mongolia.
Commenting on the launch, Bruno del Ama, chief executive officer of Global X Funds, said: “The launch of NGE and AZIA have expanded our offerings to include frontier markets— investment themes we stand behind due to their long-term potential and lower correlation with other markets.”
The Global X Nigeria Index ETF tracks the Solactive Nigeria Index. The index provides exposure to the largest and most liquid companies in Nigeria as well as overseas-listed companies that derive a significant amount of revenues from the country. The fund gives investors a cost-efficient way to access a country with significant long-term growth potential. Major holdings include Guaranty Trust Bank, First Bank of Nigeria, Zenith Bank, Nigerian Breweries and Saipem Spa.
The potential of Nigeria is well documented. Goldman Sachs recently included it in its “Next 11” economies, which are defined as a group of large, fast-growing markets that are expected to be an important source of growth and opportunity in the future. Fundamentals supporting this growth include vast reserves of natural resources, particularly oil, and attractive population demographics.
The demographics are striking. Nigeria is the seventh most populous country in the world and the most populous in Africa with over 160 million people. Moreover, with approximately 63% of the population under the age of 25, this kind of population structure can lead to what many economists call a “demographic dividend”.
The Global X Central Asia & Mongolia Index ETF tracks the Solactive Central Asia & Mongolia Index. This index provides cost-effective exposure to hard-to-access countries by investing in foreign listings of Central Asian companies as well as in companies that derive significant revenues from the region. The index is currently composed of companies that are domiciled in, principally traded in or whose revenues are primarily from Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, including companies listed in the United Kingdom, Canada, Russia and Sweden. Major holdings include KazMunaiGas Exploration Production, Kazakhmys, Eurasian Natural Resources, Dragon Oil and Kcell JSC.
In recent years, the economies of Central Asia have benefited significantly from land that is rich in natural resources; the region has become a major exporter of oil, copper, gold, silver, coal, zinc, lead, uranium, cotton and wheat. China has emerged as a key destination for these resources, and has been investing heavily to develop energy and transportation infrastructure in the region. Trade between Central Asia and China has grown from approximately $500 million in 1992 to $30 billion in 2010, reflecting an annual growth rate of over 25% (National Bureau of Statistics of China, 2012).
The Economist Intelligence Unit predicted that Mongolia will grow its GDP by nearly 14% this year, making it the second fastest growing country on the planet, behind gaming-focused Macau, a special administrative region of China.
The funds both come with management fees of 0.68% per annum.