A Closer Look At Frontier Markets

“Frontier markets”, those stock markets not yet evolved enough to be called “emerging markets”, will become the next emerging markets. This is part of a natural progression as today’s emerging markets are reclassified as “developed”.

Israel (ISL) and Singapore (EWS) are examples of former emerging markets now viewed as developed. Countries go through a growth path from having no market, as was recently the case in Russia (TRF), through frontier status to emerging status to developed status.

Early recognition of new opportunities is one potentially rewarding approach to investing. Knowing about and watching trends is part of early recognition. That’s one reason you may want to keep and eye on frontier markets.

MSCI recently published an index of 19 frontier markets: Bulgaria, Croatia, Estonia, Kazakhstan, Romania, Slovenia, Ukraine, Kenya, Mauritius, Nigeria, Tunisia, Bahrain, Kuwait, Oman, Qatar, U.A.E., Lebanon, Sri Lanka, and Vietnam.

In a recent article, we published information about the size of those country markets and about personal income and economic growth rates in those countries.

In this article, we provide the name, industry and web address of the largest public company (with a website) in each frontier market. (click image to enlarge)

Generally, the top company is a bank or telecommunications company.

There are not many opportunities for pure frontier market investments. Direct access to the countries is possible, but not at all easy.

T. Rowe Price has a new mutual fund [TRAMX], launched in September, that focuses on the Middle East and Africa that is interesting for frontier markets. Barclays has a developed country ETF for Austria (EWO) that has companies that do a lot of business in frontier markets of Europe. A small Vietnam based asset manager offers a closed-end fund available to U.S. investors through the London Stock Exchange. The fund is called Vietnam Opportunity Fund [VOF:LN] — note high expenses approaching 8%. We are not providing any positive or negative recommendation on these stocks, just noting their existence for those interested in researching them further.

We anticipate the publication of the MSCI frontier markets index and similar current or future action by S&P and FTSE will spur the introduction of other frontier market funds.

Keep your eyes and ears open to new developments in this evolving investment area.