Neil Azous of Rareview Macro and Craig Johnson of Piper Jaffray recently appeared on CNBC’s Trading Nation to discuss if there were any frontier market investment opportunities worth considering right now. It was first noted that the iShares MSCI Frontier 100 ETF (NYSEARCA: FM) (check out out frontier market ETF list here) has under-performed both the iShares MSCI Emerging Markets Index ETF (NYSEARCA: EEM) and the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) since the start of the year.
Azous then pointed out that if you have a 6 to 10 year time horizon like a private equity fund, then some of these frontier markets can be wonderful investment opportunities. However, the reason frontier markets have pulled back so much recently is that they are a back door trade associated with crude oil. If crude oil stabilizes or rises, these frontier markets should perform well in the short term (which, for frontier markets, is 18 months).
Johnson also thinks there are opportunities for relief rallies based on what happens with oil as some frontier markets in the Middle East are already down as much as 30%. He thinks frontier markets are more of a trade rather than a long term investment.
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