Corporations are taking a closer look at frontier markets for investment opportunities. Retail investors can also tap into the pre-emerging economies through frontier markets-related exchange traded funds.
According to an A.T. Kearney survey of companies’ investment attitudes, a majority of firms are looking for new opportunities to expand in frontier markets, reports Dan Keeler for the Wall Street Journal.
Specifically, of the 500 companies surveyed, 43% are invested in frontier markets and over two-thirds plan to maintain their investments or add new opportunities.
“Investors haven’t turned the page on frontier markets,” Paul Laudicina, chairman of A.T. Kearney’s Global Business Policy Council, said in the article.
For the average retail investor, broad frontier market ETFs can help people diversify into some of emerging economies of tomorrow. The iShares MSCI Frontier 100 ETF (NYSEArca: FM), Global X Next Emerging & Frontier ETF (NYSEArca: EMFM) and Guggenheim Frontier Markets ETF (NYSEArca: FRN) all cover a broad basket of varying frontier countries.
FM’s country weights include Kuwait 24.2%, Argentina 14.4%, Nigeria 12.6%, Pakistan 10.4%, Kenya 8%, Oman 5.9%, Morocco 5.5%, Kazakhstan 4%, Vietnam 3.7%, Romania 3.5%, Bangladesh 3.0% and Sri Lanka 2.5%.
EMFM includes a predominately emerging market tilt at 76.9%, but also includes a 23.1% weight toward frontier countries, including Argentina 3.8%, United Arab Emirates 3.3%, Kazakhstan 1.5%, Panama 1.8%, Qatar 1.9%, and Bangladesh 1.1%, among others.
FRN tracks Chile 40.9%, Argentina 18.2%, Colombia 11.1%, Egypt 10.6%, Nigeria 5.5%, Peru 4.3%, Kazakhstan 4.2%, Lebanon 2.7%, Romania 1.5% and Georgia 0.5%.
Alternatively, investors can pick and choose some markets with country-specific ETFs. For example, some of the larger frontier market ETFs include the iShares MSCI Chile Capped ETF (NYSEArca: ECH), Global X MSCI Argentina ETF (NYSEArca: ARGT), Market Vectors Egypt Index ETF (NYSEArca: EGPT) and Market Vectors Colombia ETF (NYSEArca: COLX).
The Global X Nigeria Index ETF (NYSEArca: NGE) has increased 16.4% over the past three months, reflecting one of the best recent performing markets after the bounce in oil prices supported the energy exporter.
The Market Vectors Vietnam ETF (NYSEArca: VNM) has been trading in a bear market, but observers believe the economy is turning around. [Vietnam ETF Looks to Shine in 2015]
Additionally, retail investors can now access the Pakistani markets through the recently launched Global X MSCI Pakistan ETF (NYSEArca: PAK). [Investing in Pakistan? There’s an ETF for That]
For more information on frontier economies, visit our frontier markets category.
Max Chen contributed to this article.