Frontier markets are going wild for investors by delivering strong returns throughout the year which are expected to continue, according to new research.
Based on a 16% return from the MSCI Frontier Markets Index, Baring Asset Management, the international investment firm, explained the new markets have doubled the performance of emerging markets.
The frontier markets are nations like Kenya and Nigeria in Africa, Argentina and the United Arab Emirates.
Analysing the growth for frontier markets, Barings points out energy and healthcare are two key areas for expansion.
In the UAE, for example, the government is considering making medical insurance compulsory and this could reflect in increased infrastructure investment through Al Noor Hospitals, one of the largest private healthcare providers sin the Middle East.
Hot tips
The firm also sees unexploited oil and gas fields in Kurdistan, in northern Iraq, presenting opportunities as they are shortly coming to the market.
Barings tips the UAE as the best of the Middle East markets, mainly due to strength and reliability in the banking sector when other nations in the region are suffering from social instability.
Nigeria is picked as one of the highlights in Africa, where the central bank has taken robust control of currency management and inflation.
Michael Levy, investment manager, Baring Frontier Markets Fund, said: “We are looking forward to a positive 2014 as frontier markets continue to develop.
“Frontier markets present investment opportunities as they are at an early stage of development, with many under-priced assets.”
Freedoms gather pace
The firm predicts the same underlying economic drivers that propelled frontier markets to the forefront in 2013 will continue to push them onwards in the coming year.
“Political developments in these countries have particularly encouraged us as the markets have become more stable and we see further moves towards democracy and social freedoms gathering pace next year, even though this is moving slowly in some cases.”
Levy also points out that more companies are coming to the markets, presenting a growing number of investment opportunities.
“For investors, new companies in the marketplace gives improved liquidity in frontier markets and we are looking forward to even more businesses to step up next year,” said Levy. “Romania looks like becoming an excellent candidate for privatisations.
“We are also monitoring Laos in particular and other frontier markets in Asia and the Pacific rim.”
Interesting read – how can you leave out Pakistan – up Equities
60% in the last 12 months.