Merrill Lynch Global Research has introduced a frontier equity index, designed to identify the largest and most liquid stocks in “frontier markets”: developing economies with undeveloped equity markets. The index is composed of 50 stocks in Europe, the Middle East, Africa and Asia, reflecting 17 countries, including the United Arab Emirates, Kuwait, Nigeria, Morocco, Pakistan, Kazakhstan, Vietnam and Cyprus. Michael Hartnett, Merrill Lynch chief global emerging markets equity strategist, said: “The ultimate goal for many investors in 2008 is to find assets which are not closely linked to the fortunes of Wall Street.” From February 2000 to December 2007, the monthly correlation of returns for the S&P 500 was 32 per cent in frontier markets, compared to 73 per cent for emerging markets and 96 per cent for developed markets. Stocks listed in the Middle East make up 50 per cent of the new index, followed by 23 per cent for Asia, 14 per cent for Europe and 13 per cent for Africa. The top three countries represented in the index are the UAE (23 per cent), Kuwait (18 per cent) and Pakistan (14 per cent). Banks dominate (40 per cent), followed by financial services companies (26 per cent) and oil and gas firms (14 per cent). To be included in the index, stocks must have a market capitalisation of at least $500 million, a three-month average daily turnover of at least $750,000 and a foreign ownership limit above 15 per cent. The composition will be reviewed twice a year.