Pensions & Investments has a must read article (“MSCI revision alters frontier markets’ makeup”) about how the subtraction of the United Arab Emirates (UAE) and Qatar from the MSCI Frontier Markets Index and their addition to the MSCI Emerging Markets Index will impact emerging market and frontier market investment funds and investors.
Specifically, funds tracking the MSCI Emerging Markets Index will now gain more exposure to the oil-rich Gulf markets while those tracking the MSCI Frontier Markets Index will have more exposure to fast-growth economies in Africa like Nigeria and Kenya as the changes will increase the latter’s exposure to frontier markets in Africa, Asia and Latin America.
The article quoted Josef Odili, the London-based head of Africa research at money manager RisCura, as saying:
“Investors want (exposure to) countries that have the significant potential to change over the next 10 years, have a rising middle class, developing financial markets and products — that is definitely not the (Middle Eastern countries)… One of the biggest issues with investing in frontier markets is how dominant the (Middle Eastern countries) were in the index — Kuwait, the UAE and Qatar represented over 50% of the index.”
Note: Qatar’s GDP per capita was almost $94,000 at the end of 2012 verses just $3,000 for Nigeria and almost $52,000 for the US.
However, these changes along with investing in less liquid frontier markets like Nigeria and Kenya in general present their share of challenges to fund managers and investors as Oliver Kettlewell, a senior investment research analyst at Morningstar OBSR, observes:
“One of the biggest problems in (frontier markets) is liquidity — if a lot of managers are launching frontier markets funds and investors pour into them, that is pushing up prices. But if there are problems in those markets and everyone rushes for the door, then selling stocks that don’t trade very well could be an issue.”
To read the whole article, MSCI revision alters frontier markets’ makeup, go to the website of Pensions & Investments.
- Frontier Market ETFs Have 72% Exposure to Oil-Dependent Countries (FT Adviser)
- How MSCI’s Removal of Qatar & UAE Impacts the Frontier Markets Landscape (MM)
- History Says Investors Get Gored by MSCI Upgrades (Reuters)
- Fund Managers’ Opinions on the UAE and Qatar’s Emerging Markets Upgrade (The National)
- Frontier Markets: Small, Concentrated & Misunderstood (Financial Advisor)
- Nigeria’s Forte Oil Plc and EcoBank Transnational Inc (ETI) Added to MSCI’s Frontier Market Index (AllAfrica.com)
- Results of MSCI 2017 Market Classification Review (MSCI)
- 2017 Global Retail Development Index (ATKearney)
- The “Halo Effect” of Saudi Arabia’s Emerging Markets Arrival (Franklin Templeton)
- Opportunities in the Next “Emerging” Emerging Market of Africa (Franklin Templeton)
- Investors Exit Africa for Other Frontier Markets (WSJ)
- Nigeria, Argentina and Vietnam Top the Frontier Markets Sentiment Index (WSJ)
- Africa Rising: The Hopeful Continent (Wellington Management)
- Investing in Nigeria ETFs / Nigeria ETF List
- Will Frontier Markets Follow the Same Emerging Market Pattern? (The Telegraph)