Frontier Markets Are Worth Exploring
Several regions look promising as the headwinds abate
March 2019, London. Emerging market (EM) funds are set to make a return, now that the strong headwinds have abated. So says the latest issue of The Cerulli Edge―European Monthly Product Trends.
After 12 torrid months—the MSCI Frontier Markets Index was down 15% in US dollar terms as at the end of February 2019 compared to the MSCI World Index’s 1% gain—investors in frontier markets are able to breathe a sigh of relief.
Frontier markets have been far less rewarding for investors than their emerging counterparts, notes Cerulli Associates, a global research and consulting firm. In the past 10 years, the frontier markets index has delivered an annualized return of 8.6%, compared to 10.7% for EM and 13.7% for the MSCI World Index.
However, several of the headwinds that have hampered frontier markets have eased. “The US Federal Reserve appears less likely to tighten policy further, the threat of trade disputes appears to have diminished, and China has put in place measures to stimulate its economy,” says André Schnurrenberger, managing director, Europe at Cerulli Associates. “Together these factors may be constructive for frontier markets in the near term.”
Cerulli says several regions appear favorable for investors at present. In the Middle East and North Africa, fiscal reforms, rising corporate earnings, improving valuations, and higher inflows of foreign capital should stand the region in good stead. Similarly, several catalysts such as population growth, rising incomes, and urbanization are benefiting a number of Asian markets, including Vietnam.
Looking for more information? Contact Us.