EXCLUSIVE: Don't Write Off Frontier, Emerging Markets - There's So Much Variety - Conference

Tom Burroughes

20 June 2016

Frontier and emerging markets offer considerable opportunity for returns but they are extremely diverse and investors must typically consider these as long-term investments, a conference organised by WealthBriefing heard recently.

The conference, held in London, discussed how there is something of a fuzzy boundary between what are considered emerging markets, and frontier markets, the latter being typically understood as younger, less mature economies.

“Such markets have been horribly out of favour...it looks to us as an asset class that has hit bottom,” Dominic Scriven, chief executive of Dragon Capital, an investment firm focused on Vietnam, said.

Speakers on the panel alongside Scriven were Andrew Lister, senior investment manager at Aberdeen Asset Management; Ian Beattie, managing partner and co-chief investment officer, NS Partner; and Nicholas Paris, director, portfolio manager, LIM Advisors. Sponsors for the event were Bulletin; Chelverton Asset Management; Dragon Capital; Eclectica Asset Management; ProFundCom; smartKYC; Standard & Poor’s MMD; Vanguard, and Wealth Management Association.

Emerging and frontier markets have languished in recent years; the deceleration of China’s economy and cooling of commodity and energy markets, plus the appreciation of the dollar, have hit indices. In 2015, for example, the MSCI EFM Index, tracking emerging and frontier markets, fell 14.9 per cent (in dollar terms). Since the start of 2016, total returns (adding capital growth to reinvested dividends) are 2.4 per cent.

“There are lots of emerging and frontier markets that are really exciting at the moment,” Beattie said, citing a raft of reforms that are being undertaken in a number of countries, citing examples of India and Indonesia.

“Yes, they cannot make reforms,” Lister said.

Looking at a broader issue - the development of trading links between the emerging/frontier and developed worlds, such as the Trans-Pacific Partnership - Beattie raised concerns about some flourishing of protectionist rhetoric in recent times, and possible action. He made a passing reference to the ascent of Donald Trump, the Republican front-runner as of the time of the conference. Trump has called for tariffs against China. “Some people seem to have forgotten that trade is a win-win,” he said.