Aiming to profit from what it sees as a number of prominent current trends, HSBC has launched a low-cost exchange-traded fund investing in the South African market.

The HSBC MSCI South Africa ETF, with a total expense ratio of 0.6 per cent, aims to recreate the performance of the MSCI South Africa Index, a measure of the largest companies on the index. It is listed on the London Stock Exchange in sterling and US dollars, with further registrations and cross-listings planned in Europe.

The bank said the new fund will aim to invest in securities in “generally the same proportions as in the index”, meaning it is largely a physical ETF; however it also noted that in some cases it will use financial derivative instruments “to replicate the performance of selected securities”. 

With this launch, HSBC is tapping into an emerging market which, along with other African markets such as Nigeria and Kenya, is receiving a lot of attention at the moment as a source of future growth. This is partly because the continent has received a large boost in the form of commodities demand from the Asian economies. Underscoring the political and economic links being forged between Africa and Asia, at the end of last year South Africa was invited to join the BRIC summit by China.