What are frontier markets? The term “frontier markets” is a term that was originally coined by Farida Khambata in 1992, while with the International Finance Corporation. This term was used to describe a small sub-set of emerging markets, considered to be less developed than many emerging markets, thus the name “frontier markets.” These areas of the world are considered to have investment potential, but typically have lower levels of capitalization and liquidity than some of the more developed markets. Investors that are looking for higher returns on investment in the long term are going to be more interested in investing in frontier markets.
What are frontier markets in the Vietnam
When a country has been labeled as a frontier market, it is expected that over time the country will continue to grow over time, which is going to result in the market becoming much more liquid. Over time, these frontier markets will begin to exhibit traits that are largely seen in the larger, more developed emerging markets.
Many investors utilize frontier markets as a way to diversify their investments, since often times frontier markets are less connected to the world economy, and is going to have a low correlation with other markets. Over time, as the market becomes more correlated with other markets, the risk will increase, leaving many to pursue other diversification methods.
When asking, ‘What are frontier markets‘ understand that the term ‘frontier markets’ first saw widespread use when the IFC Emerging Markets Database started to publish data that was just becoming available on smaller markets, in 1992. This data had not been previously published, but opened up the general public to the idea of investing in smaller emerging markets that had not been highly sought after investment opportunities so far. After the purchase of EMDB from IFC by Standard and Poor in 2007, Standard and Poor launched the first index aimed at identifying frontier markets with investment potential, called the Select Frontier Index. This helped to increase the adoption rate of the term, which has become commonly used when identifying investment opportunities of that subset of emerging markets. Countries that are considered to be frontier markets include Vietnam, Kenya, Qatar, Jordan, Bahrain, Argentina, Cyprus, Macedonia, Malta and Nigeria, among a host of others. Of the countries that are listed on the frontier market list, Jordan, Qatar and the United Arab Emirates are being considered for an upgrade from ‘frontier market’ to ‘emerging market’ by Standard and Poor.
Kamm Investments has identified frontier markets in the Vietnam as a potential hotspot for investment, with relatively low risk and high returns available.