Wealth of Natural Resources
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, uranium and cotton. China has emerged as a key destination for these resources, and has been investing heavily to develop energy and transportation infrastructure in the region. Although the capital markets in many Central Asian countries are underdeveloped, the Global X Central Asia & Mongolia Index ETF (AZIA) provides cost-effective exposure to Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan by investing in foreign listings of Central Asian companies as well as in companies that derive revenues from the region.
Wealth of Natural Resources
Energy Exports Providing Growth - The IMF forecast GDP growth of 5.5% in 2013 for energy-exporting Central Asian countries, while the Economist Intelligence Unit predicted that Mongolia will grow its GDP by nearly 14% this year, the second highest growth rate of any country (2013).
Windfall Revenues - Several Central Asian countries have developed sovereign funds for collecting windfall resource revenues - Kazakhstan has more than $56 billion in its National Fund and forecasts that this could grow to more than $100 billion by 2015 (Reuters, 2013).
Developing Strong Links with China
In recent years, Central Asia has benefited from increasingly strong ties with China. As the largest consumer of natural resources in the world, China has a vested interest in developing the region and securing future sources of long-term supply for a wide range of commodities.
Trade Growth - Trade between Central Asia and China has grown from approximately $500 million in 1992 to $30 billion in 2010, an annual growth rate of over 25%. More than 1,000 Chinese companies are currently operating in Central Asia (NBS China, 2012).
Infrastructure Links - China recently opened a $962 million railway with Kazakhstan through the Korgas Pass - analysts expect the trade route to transport 20 million tons of cargo per year by 2020, which is facilitated by existing highway and pipeline connections (Economic Times, 2012).
Developing Strong Links with China
Regional Coordination - China has established the Shanghai Cooperation Organization (SCO), a regional economic and security bloc that links China, Russia and the countries of Central Asia. Through the SCO, China has pledged a $10 billion loan package to allow Central Asian nations to invest in road, railway and energy projects (Reuters, 2012).
Diversification Efforts - China has also granted favorable loans to Central Asian economies to help diversify their economies, with particular focus in the telecommunications and agricultural sectors (Reuters, 2012).
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Investing involves risk, including the possible loss of principal. International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
Decreasing Asian imports, new trade regulations, changes in exchange rates, a recession in Asia or a slowing of economic growth in this region could have an adverse impact on the economies of Central Asia. The countries in Central Asia present different economic and political conditions from those in Western markets, and less social, political and economic stability. In addition, the ability of companies to efficiently conduct their business activities in Central Asia is subject to changes in government policy or shifts in political attitudes within countries in the region. Any significant economic or political turmoil in China itself, may also have a significant negative impact on the financial markets in Central Asia.
Carefully consider the Fundsí investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fundsí prospectus, which may be obtained by calling 1-888-GX-FUND-1 (1.888.493.8631), or by visiting www.globalxfunds.com. Read the prospectus carefully before investing.
Global X Management Company, LLC serves as an advisor to the Global X Funds. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Global X Management Company or any of its affiliates. Solactive Indexes have been licensed by Solactive AG for use by Global X Management Company, LLC. Global X Funds are not sponsored, endorsed, issued, sold, or promoted by Solactive AG nor does this company make any representations regarding the advisability of investing in the Global X Funds.