A growing number of investors are starting to branch out beyond emerging market exchange traded funds (ETFs) as they explore other areas to make their money work. One such area gaining appeal is that of frontier markets – those economies that are even smaller than emerging ones that have even more room to grow.
Wherever you choose to park your cash, you’re joining a growing number of emerging market investors. Last week, such funds attracted $1.7 billion, up from $571.4 million in the previous week, EPFR said.
Chua Kong Ho and David Yong for BusinessWeek report that the MSCI Emerging Markets Index has rallied 73% this year, set for its best annual performance. Developing nations were the 10 best-performing markets this year as stimulus measures from China to Brazil helped bolster a recovery in those nations. [Other Latin American economies that may be worthy.]
Analysts predict that emerging markets are going to continue to be the hottest trend going into 2010, with investors flocking to put their money into Brazil, India, China and even smaller nations. Daniel Tovrov for Mutual Fund Wire reports that money managers are looking past basic emerging markets and developed nations, instead exploring frontier markets. Areas such as Pakistan, Sri Lanka and Pakistan are attracting foreign investment, as their growth potential is greater. A growing number of ETFs have been launched in recent years to represent this increasingly attractive space. [Frontier market ETF options.]
News Center comments that frontier markets could be the sweet reward of 2010 if investors are willing to take larger risks in illiquid, unstable and underdeveloped markets. [Where is the reward within the risk?] If BRIC economies appear saturated and overpriced to you, a frontier market country may be the answer.
Both areas have risks, so put your strategy in place before you invest. We use the 200-day moving average to identify potential long-term uptrends, and we have an exit strategy that includes a stop-loss point. [Read more about trend following here.]
For more stories about emerging markets, visit our emerging markets category. Visit our frontier market category if you’re interested in exploring your options in that area.
- Vanguard Emerging Markets (NYSEArca: VWO): up 73.2% year-to-date
- iShares MSCI Emerging Markets (NYSEArca: EEM): up 68.2% year-to-date
- Claymore BNY/Mellon Frontier Markets (NYSEArca: FRN): up 49.3% year-to-date
- PowerShares MENA Frontier Markets (NYSEArca: PMNA)L up 2.9% year-to-date