2013 Hasn’t Been A Good Year For South Africa

While most equity markets have been enjoying a good year so far, South Africa has unfortunately not participated. Down nearly 12% YTD, the iShares South Africa ETF (EZA) has not been able to catch its stride in 2013.

Looking at the below chart, it’s almost as if someone flipped a switch when the ball dropped on New Year’s for South Africa. A large share of the equity and bonds traded in South Africa are owned by foreign investors. With the country’s currency (the rand) quickly devaluing many are pulling their money out of the economically weak country. South Africa will be holding elections next year and there seems to be many questions regarding policy changes as a result of the election. This could help explain why the South African ETF has diverged from other foreign equity markets.

With the multi-month drop in EZA, we can see the Relative Strength Index has created a level of resistance near 55, a sign of bearish momentum. In the bottom panel of the chart we can see the massive outflows based on the On Balance Volume indicator. In late April the ETF saw a quick pop but there doesn’t appear to have been any kind of substantial buying pressure that went into EZA, indicating that the short-lived rally wouldn’t hold.

Prior support appears to be at the $59-$60 level. However, as long as we see the bearish momentum in the RSI indicator and selling pressure matching the drop in price, it’s going to be difficult for bulls to hold their ground if/when we get to $59.


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