Frontier markets offer strong growth potential for investors in an otherwise volatile investment environment, and also offer attractive valuations, according to Franklin Templeton Investments portfolio manager Mark Mobius.
He said frontier markets – as opposed to emerging markets – also appear not to have been influenced by the current volatility of establish and emerging markets market
“Conversely, these markets offer strong economic growth potential, in part because they are less correlated with developed markets than traditional emerging markets.”
Frontier markets “as diverse as the UAE, Kazakhstan, , Nigeria and Vietnam, Romania, Croatian and Ukraine are forecast to grow at 5 per cent this year, and any of which could become a major emerging marker this year”, Mobius said.
Nevertheless, he cautioned that frontier markets contain some “well-known risks” for investors, including undercapitalization, weaker regulatory frameworks than in more established markets, relatively poor liquidity, and restrictions on foreign ownership.
“Investors need to balance their investment portfolios depending on their risk tolerance, or if risk avers, seek mainstream emerging market funds that contain some frontier exposure.”
