How Government Reform Is Awakening One Market
In 2022, the decade-plus "spectrum stalemate" ended in South Africa...
See, if you want to transmit data across the airwaves, you must use the radio spectrum. That's what carries data wirelessly across the globe... and makes it possible to use your cellphone or satellite TV.
But spectrum is a finite resource. So governments will hold "spectrum auctions" to see who gets a slice.
The U.S. typically holds spectrum auctions every one to three years. But in 2022, South Africa hadn't had an auction in 17 years. That was long enough for the country to miss out on 4G/LTE wireless entirely.
As I'll explain, the turning point came in 2020, when a series of economic reforms finally broke the spectrum stalemate in 2022.
But I'm not writing to pitch some obscure telecom stock in Johannesburg. The context is much bigger than that...
South Africa's economy is expanding today. Investors are flocking to the country like never before. And South African stocks have emerged from a seven-year slumber.
Let me explain...
Economic Reforms Are Driving This Market Higher
Today, two unprecedented tailwinds are lifting South African stocks...
The first is the reform package I mentioned earlier, known as "Operation Vulindlela."
Phase 1 of Operation Vulindlela began in October 2020. It targeted key drivers of economic growth, including...
- Paving the way for private investment in South Africa's energy grid
- Slashing freight regulation
- Modernizing South Africa's work-visa system
And of course, it unlocked South Africa's radio spectrum, bringing the country into the 5G era.
But Operation Vulindlela is just one side of South Africa's new pro-business crusade. I wrote about the other side last September...
South African politics were dominated for more than 25 years by Nelson Mandela's party, the African National Congress ("ANC"). But over the decades, the ANC fell prey to corruption and gridlock...
But that's changing today. The ANC failed to win a majority in the 2024 election. Instead, South Africa formed a coalition government for the first time since apartheid...
The new Government of National Unity is much more business-friendly than the ANC.
In fact, it just announced Phase 2 of Operation Vulindlela earlier this month. The second phase will improve local government and continue building digital infrastructure.
And the market is cheering South Africa's reforms today. We can see it using the iShares MSCI South Africa Fund (EZA). This exchange-traded fund contains a broad sample of South African businesses and reflects the country's performance as a whole.
EZA has been in an uptrend since 2024. And it'll likely break out to a multiyear high in the coming months. Take a look...
EZA reached a historic peak in 2018 but collapsed into 2020. And after reclaiming some of those losses, it has turned sideways since. But with the current uptrend, South African stocks are set to punch through that ceiling. New highs are on the way.
You don't often get the chance to buy into an entire country just as it's turning a corner. But that's exactly what's possible as South African stocks break out of a seven-year slumber.
A generational economic shift is paving the way for more gains ahead in South Africa. Don't miss this historic expansion... Consider adding EZA to your portfolio today.
Good investing,
Sean Michael Cummings
Further Reading
"Following the trend is a great rule of thumb for successful investing," Brett Eversole writes, "because it tells you what's most likely to happen next." The S&P 500 Index recently broke a rare oversold streak – and that could mean we're in for a double-digit rally over the next year... Learn more here.
Everyone wants to earn as much money as possible in the market. For years, U.S. stocks have been investors' best bet – which has kept a generation of folks wary of foreign stocks. But things may be changing soon... Read more here.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Charles Schwab (SCHW)... brokerage services
Barclays (BCS)... financial services
Banco Santander (SAN)... Spanish bank
Mastercard (MA)... credit cards
Travelers (TRV)... insurance
Netflix (NFLX)... video streaming
Okta (OKTA)... identity-protection software
Thomson Reuters (TRI)... media, finance, and more
Urban Outfitters (URBN)... apparel
TJX Companies (TJX)... discount department store
Chewy (CHWY)... pet products
U.S. Foods (USFD)... packaged foods
Monster Beverage (MNST)... energy drinks
Mosaic (MOS)... fertilizer
Trane Technologies (TT)... HVAC manufacturer
Johnson Controls (JCI)... industrial equipment
Comstock Resources (CRK)... natural gas
NEW LOWS OF NOTE LAST WEEK
Not many... It's a bull market, you know!
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