Click here to close now.

SYS-CON MEDIA Authors: Pat Romanski, Rex Morrow, Datical, Liz McMillan, John Wetherill, Ruxit Blog

News Feed Item

Director of ETF Research for Zacks Investment Research Neena Mishra highlights: Emerging market ETFs have been very weak, but frontier markets have held up. What is behind frontier markets' outperformance?

CHICAGO, Feb. 11, 2014 /PRNewswire/ -- Securities in this article include: Market Vectors Gulf States Index ETF Fundamentals (AMEX:MES-Free Report), WisdomTree Middle East Dividend Fund (AMEX:GULF-Free Report) and Van Eck Market Vectors Vietnam ETF (AMEX:VNM-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

How Frontier Market ETFs Surged as EMs Plunged written by Neena Mishra of Zacks Investment Research:

Past few months have been quite ugly for emerging market ETFs. The start of QE tapering coupled with slowing growth in China has made foreign investors nervous about these investments.

Even though emerging markets may stabilize after the current round of panic subsides, they may not regain their past glory any time soon. As major emerging economies are beginning to mature and slow-down, they will no longer able to repeat their stellar performance seen not that long ago.(Read: Best ETF Startegies for 2014)

Investors looking for the "next big thing" in the investing world are now turning to "frontier" or "pre-emerging" markets. These countries offer compelling investment opportunities with solid growth potential and low valuations.

The MSCI frontier markets index surged about 26% last year while the emerging markets index plunged more than 3%. The outperformance continues this year as well.(Read: 3 Top Ranked ETFs that will crush the market in 2014)

What are Frontier Markets?

Although there is no strict definition for frontier markets, these are typically countries that are in the earlier stages of economic development. Their capital markets are underdeveloped and not fully/easily accessible to foreign investors.

The term "Frontier Markets" was first used by the International Finance Corporation to describe a set of small, illiquid and underdeveloped markets. Now MSCI, S&P and Russell have their own definitions of "Frontier Markets". (Read: Emerging Market ETFs: Any Bright Spots?)

MSCI Frontier Markets Index currently includes 34 countries. Most of these countries are in Middle East, sub-Saharan Africa, Southeast Asia, Latin America or Eastern Europe regions.

Why Frontier Markets?

Frontier markets are expected to grow faster than emerging and developed economies. Further, they have relatively lower valuations as well as higher income yield.

As emerging markets have become increasingly integrated with the global markets, their correlations with the developed markets have increased and the benefits of diversification have declined.

On the other hand, frontier markets still have relatively lower correlations with the developed markets. Further, most of them were not did not see major foreign investment inflows in the past few years and thus are less vulnerable to QE taper. Thus adding them as small satellite holdings in an investment portfolio can improve risk-adjusted returns over long term.

Currency Factor in Performance

One of the reasons for outperformance of frontier markets is the currency factor. Some of the frontier markets—which saw strong performance in 2013 as well as this year—peg their currencies to the US dollar or to a basket dominated by the US dollar.

As such these currencies have remained steady while currencies of most emerging markets have suffered a lot of pain. Currency losses have been a big factor is emerging markets' poor performance.

What are the Risks?

Before considering frontier market investments, investors need to be aware of liquidity and political risks of investing in these countries as they are much riskier even compared with most emerging markets. But risk-tolerant investors are likely to reap significant rewards in the long-term.

Below we have highlighted some of the options available to investors in this space.

Gulf ETFs

Companies in the Gulf region have been reporting strong earnings in the past few years and property markets have shown improvement of late. Last year, MSCI upgraded UAE and Qatar to emerging market status from frontier market. The upgrade is expected to result in massive increase in capital flows to the region. (Read: Can Gulf ETFs keep glowing?)

Due to expansionary fiscal policies and low interest rates, economic activity has remained steady in recent years. Per IMF, Qatar will grow at 5% this year, while Saudi Arabia and the UAE will grow about 4%.

UAE and Qatar peg their currencies to the US dollar and while Kuwait pegs its currency to a basket of currencies, the basket is believed to be heavily weighted towards the greenback. As a result these currencies have remained rather stable.

Market Vectors Gulf States Index ETF Fundamentals (AMEX:MES-Free Report) andWisdomTree Middle East Dividend Fund (AMEX:GULF-Free Report) are the two options available to investors.

Vietnam

Vietnam continues to be the main beneficiary of the migration of low-end manufacturing out of China as the producers try to take advantage of wages that are about half of that in China. The shift in China's policy to focus more on domestic consumption will also benefit Vietnam as an outsourcing center.

A pickup in developed economies is good for the country as they account for about half of country's exports, mainly apparel and electronics. Van Eck Market Vectors Vietnam ETF (AMEX:VNM-Free Report) is the only ETF option available to investors to access Vietnam's equity markets.

For the full article, please visit Zacks.com at:

http://www.zacks.com/stock/news/122537/how-frontier-market-etfs-surged-as-ems-plunged

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros http://at.zacks.com/?id=113

Follow Eric on Twitter:  http://twitter.com/ericdutram

Join Zacks on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

http://www.zacks.com

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
2015 predictions circa 1970: houses anticipate our needs and adapt, city infrastructure is citizen and situation aware, office buildings identify and preprocess you. Today smart buildings have no such collective conscience, no shared set of fundamental services to identify, predict and synchronize around us. LiveSpace and M2Mi are changing that. LiveSpace Smart Environment devices deliver over the M2Mi IoT Platform real time presence, awareness and intent analytics as a service to local connecte...
IBM has acquired Blue Box Group, Inc., a managed private cloud provider built on OpenStack. Customers benefit from the ability to more easily deploy workloads across hybrid cloud environments. Financial details were not disclosed. Enterprises are seeking ways to embrace all types of cloud to address a wide range of workloads. Today's announcement reinforces IBM's commitment to deliver flexible cloud computing models that make it easier for customers to move to data and applications across cloud...
The Internet of Things is not only adding billions of sensors and billions of terabytes to the Internet. It is also forcing a fundamental change in the way we envision Information Technology. For the first time, more data is being created by devices at the edge of the Internet rather than from centralized systems. What does this mean for today's IT professional? In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will addresses this very serious issue o...
paradigm shifts in networking, to cloud and licensure, and all the Internet of Things in between. In 2014 automation was the name of the game. In his session at DevOps Summit, Matthew Joyce, a Sales Engineer at Big Switch, will discuss why in 2015 it’s complexity reduction. Matthew Joyce, a sales engineer at Big Switch, is helping push networking into the 21st century. He is also a hacker at NYC Resistor. Previously he worked at NASA Ames Research Center with the Nebula Project (where OpenSta...
While there are hundreds of public and private cloud hosting providers to choose from, not all clouds are created equal. If you’re seeking to host enterprise-level mission-critical applications, where Cloud Security is a primary concern, WHOA.com is setting new standards for cloud hosting, and has established itself as a major contender in the marketplace. We are constantly seeking ways to innovate and leverage state-of-the-art technologies. In his session at 16th Cloud Expo, Mike Rivera, Seni...
"Verizon Digital Media Services is responsible for the broadcast, video and content delivery network that accelerates, scales and helps our customers reach end users with all kinds of video and web content," stated James Segil, CMO of Verizon Digital Media Services, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
"For over 25 years we have been working with a lot of enterprise customers and we have seen how companies create applications. And now that we have moved to cloud computing, mobile, social and the Internet of Things, we see that the market needs a new way of creating applications," stated Jesse Shiah, CEO, President and Co-Founder of AgilePoint Inc., in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The most often asked question post-DevOps introduction is: “How do I get started?” There’s plenty of information on why DevOps is valid and important, but many managers still struggle with simple basics for how to initiate a DevOps program in their business. They struggle with issues related to current organizational inertia, the lack of experience on Continuous Integration/Delivery, understanding where DevOps will affect revenue and budget, etc. In their session at DevOps Summit, JP Morgentha...
The world is at a tipping point where the technology, the device and global adoption are converging to such a point that we will see an explosion of a world where smartphone devices not only allow us to talk to each other, but allow for communication between everything – serving as a central hub from which we control our world – MediaTek is at the heart of both driving this and allowing the markets to drive this reality forward themselves. The next wave of consumer gadgets is here – smart, con...
Health care systems across the globe are under enormous strain, as facilities reach capacity and costs continue to rise. M2M and the Internet of Things have the potential to transform the industry through connected health solutions that can make care more efficient while reducing costs. In fact, Vodafone's annual M2M Barometer Report forecasts M2M applications rising to 57 percent in health care and life sciences by 2016. Lively is one of Vodafone's health care partners, whose solutions enable o...
"At Harbinger we do products as well as services. Our services are with helping companies move their products to the cloud operating systems. Some of the challenges we have seen as far as cloud adoption goes are in the cloud security space," noted Shrikant Pattathil, Executive Vice President at Harbinger Systems, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The multi-trillion economic opportunity around the "Internet of Things" (IoT) is emerging as the hottest topic for investors in 2015. As we connect the physical world with information technology, data from actions, processes and the environment can increase sales, improve efficiencies, automate daily activities and minimize risk. In his session at @ThingsExpo, Ed Maguire, Senior Analyst at CLSA Americas, will describe what is new and different about IoT, explore financial, technological and re...
"At our booth we are showing how to provide trust in the Internet of Things. Trust is where everything starts to become secure and trustworthy. Now with the scaling of the Internet of Things it becomes an interesting question – I've heard numbers from 200 billion devices next year up to a trillion in the next 10 to 15 years," explained Johannes Lintzen, Vice President of Sales at Utimaco, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in San...
Aria Systems, which helps enterprises grow recurring revenue, today announced that its co-founder and inventor of cloud billing Brendan O'Brien, will be a featured speaker at the Cloud Expo, June 9-11 at The Javits Center in New York. Aria also will be demonstrating its Active Monetization platform in Booth #424 on the Expo Floor. O'Brien will lead the following sessions: June 9 - 11:00 am - 11:35 am, Room 1A16 with participants from Constant Contact, MGI Research and ATG Enabling Complex ...
"For the past 4 years we have been working mainly to export. For the last 3 or 4 years the main market was Russia. In the past year we have been working to expand our footprint in Europe and the United States," explained Andris Gailitis, CEO of DEAC, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.