For frontier markets for the next big thing in investment

Emerging markets portfolio managers specialize in the search for the next big thing. But after the conversion of many economies in Asia and Latin America during the two decades and strong yields and dominant popularity of their markets, which are left to find?

What stock markets in Africa, the countries of the Middle East and Asia, as well as to the Viet Nam, in Bangladesh and Sri Lanka? Investment advisers who focus on developing countries argue that many of these so-called border, especially in Africa, markets offer opportunities similar to markets emerging of previous generations.

"Africa will be the next great growth story that has largely unknown," said Larry Seruma, Manager of the Nile Pan Africa Fund, a mutual fund U.S. holding shares in companies that are based in the region or that are of important cases. "It can supplant the Brazil, China and the Russia if its potential is realized," he said.

It is a big if, and consider problems of Africa he only seem larger. There is misery, disease and hunger, aggravated by the other scourges that limit opportunities for Africans to improve their conditions of life: political instability, inadequate education and in some cases long military conflict.

But the case for the region and border markets elsewhere are precisely that they only set on the path of economic and social progress and still have a long way to go. It is the same journey made by the major emerging economies of today. There are barely four decades since Chinese farms were decollectivized, for example, and less than two decades the Brazilian inflation was running at more than 40 per cent per month.

"Frontier markets are often in a State of economic development much earlier than the major emerging markets and may have only recently opened to foreign investment," said Mark Mobius, one of the pioneers of investment in developing countries, who heads operations in emerging markets in Franklin Templeton, the fund company. "This helps explain their high growth potential." New markets were generally more space to grow, and the research of acute potential growth in global instability encouraged many investors to expand their horizons. »

A recent report by Citigroup has identified 11 economies should show exceptional growth in the century, including two of the usual suspects, China and the India. Most of the others are frontier markets - Bangladesh, Iraq, Mongolia, Nigeria, Sri Lanka and Viet Nam - otherwise minor emerging markets that managers of the border sometimes Portfolios invest in, as Egypt and the Philippines.

Calls to invest in places as they expect that they become future markets. Today and yesterday, it is another story. The MSCI index markets lost border approximately two-thirds of its value in the global collapse of 2008 and 2009.

This is a little more global harm than the index of MSCI emerging and mature markets, but where frontier markets are really suffering in comparison is in the period since then. The resumption of border markets was much less deep, leaving the index at least half of its 2008 high, while the other two indices have recovered almost all of their lost ground.

Pradipta Chakrabortty, a manager of Harding Loevner New Frontier market fund, attributed the weakness, especially in Africa, of the political unrest of the revolts of Arab spring and a series of economic and financial difficulties, steps over there, but to the North.

"Africa has many capital from Europe," he said. "It all started in 2010 flowing into frontier markets, but recovery is suppressed in the egg of the sovereign debt crisis".

Mr. Chakrabortty pointed out, however, that some investors deep pockets continue to funnel money markets of the border. Chinese companies make huge purchases of industrial and agricultural assets in places such as Africa and the Viet Nam.

Whenever investors decide to join them, there are three themes that fund managers expect returns of drive for the coming years: the growth of a consumer society of middle class, with all services and products which are its attributes; production and export of natural resources. and the development of infrastructure, including transport and communication networks necessary to the success of companies involved in the other two themes.

Mr. Chakrabortty is some of the best opportunities of these days in Africa and the Middle East and the Viet Nam and Bangladesh, where labour is cheaper than elsewhere in Asia. His portfolio is invested strongly focused on consumption of stocks such as Safaricom, a provider of telephone services Kenya and Equity Bank, also in the Kenya. Other selections include Squire Pharmaceuticals in Bangladesh and First Bank of Nigeria.

Mr. Mobius sees encouraging prospects for the border of the markets almost everywhere. He was "optimistic about the potential for growth in the long term in many countries" in Africa and said that "we must not forget countries of Latin America, such as the Colombia and Peru, the countries of Europe, such as the Romania and countries in Asia such as the Viet Nam, Pakistan and Sri Lanka."

Mr. Seruma focuses on Africa, but he does not feel the need to invest it to capture the promise of the continent. Its portfolio includes funds such as oil in Africa, who discovered the Kenya reservations, but have a shares listed on the Canada and Tullow Oil, which is registered in Britain and has assets of energy in Ghana and Uganda.

The Fund also has hybrids developed border as East African Breweries, which is half owned by the conglomerate global beverage Diageo and the Nestlé Nigeria. Among stocks African pure love are Guaranty Trust Bank in Nigeria and Flour Mills of Nigeria, a producer of basic food.

"As more capital gets employees" markets follows, "you will see the return to catch up with the rest of the world", Mr. Seruma predicted. For how long it will take to become a big thing, it is uncertain. "We must focus on the history of long-term growth", he said "" and be a patient investor.""

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