iShares MSCI South Africa ETF

EZA

Market cap $560M

The iShares MSCI South Africa ETF has delivered stellar returns of 60% in 2025, which is double the returns of EMs, and triple the returns of global stocks. EZA offers high dividend yields and exposure to income-oriented sectors such as materials and financials but suffers from high volatility and significant tracking error of its index. EZA's top holding-Naspers which has a hefty weight of 14%, doesn't necessarily have strong enough ties with South Africa.

Now in the home stretch of Q3, international stocks have had a banner year in 2025. Whereas the United States' S&P 500 is currently up 12.7% year to date, the MSCI All World Ex. US ETFs have gained well over 24% in that same span. Italy (EWI) is up over 45% on a year to date basis. That puts it on pace for the ETF's largest annual gain on record (it began trading in March 1996) if it holds.

I rate EZA a hold due to recent explosive growth; I recommend waiting for a 10% price drop before buying. EZA offers dynamic exposure to South Africa's finance and materials sectors, but is highly concentrated in top holdings and sectors, increasing risk. The fund benefits from strong local consumer growth and global commodity demand, but I see short-term downside in materials due to unsustainable commodity prices.

It's the year of foreign equities ETF diversification and performance. For many ETF issuers, their international or ex-U.S. ETF strategies have led their suites for performance amid rising domestic risks.

EZA has outperformed gold, global banks, and the S&P 500 since October 2023, driven by strong momentum and a bullish macro backdrop. The ETF offers a compelling valuation, with a P/E just above 10 and a PEG ratio under 1.0x, plus a high 5.81% dividend yield. EZA's portfolio is concentrated in Financials and Materials, making it sensitive to trends in global banking and gold prices.

A continued rise in sovereign and country risks pose threats, especially given the emerging faultlines in the GNU and South Africa's tariff vulnerabilities. Foreign operators listed on the JSE might experience contrasting outcomes, yet, global macro-level concerns remain. Factors such as supportive Gold prices and robust performance from Naspers have carried EZA in recent times.

South Africa offers investment opportunities, but growth remains low; EZA ETF provides access with a 7.37% dividend yield and a low expense ratio of 0.59%. EZA is concentrated in Financials, Basic Materials, and Communication sectors, with high volatility and limited diversification; top 10 holdings make up over 60% of the portfolio. South Africa's economic conditions include low GDP growth, high unemployment, and moderate inflation; interest rates are unlikely to drop significantly due to rising inflation.

Topping the list and outperforming in that span have been emerging market countries like Brazil and India, which are both up well over 6.5%. International ETFs don't only have momentum on their side, but they also offer higher yields than the US at the current moment. Across all 22 ETFs, the average yield stands at 3.25%.

iShares MSCI South Africa ETF has high exposure to economically sensitive sectors, leading to potential volatility, especially during economic downturns. EZA's lack of technology sector exposure weakens its long-term growth prospects, contributing to poor performance over the past decade. Despite South Africa's gradually improving economy, EZA's low valuation reflects weak growth prospects and high volatility, making it less attractive.

Continued little improvements in South Africa can go a long way. More privatization can boost growth.