Frontier emerging markets outperforming BRICs
Heightened risk aversion has sent money fleeing to countries less integrated to the world economy, with under-developed "frontier" markets such as Peru and Jordan the improbable beneficiaries.
Deutsche says credit turmoil has helped emerging marketsAlthough such rudimentary stock markets are traditionally deemed riskier, they provide a shelter from flailing global credit markets.
In the tumult of recent months, less mature markets have not only outperformed developed markets but also their more established emerging counterparts, epitomised by Brazil, Russia, India and China - the BRICs.
Since the start of the year, Standard & Poor's (S&P) BRIC 40 Index has lost 8.3 percent while its Global 1200 Index has shed 7.2 percent.
The S&P/IFCG Extended Frontier 150 Index, comprising companies in 30 less developed markets, has proved more resilient, shedding 2.6 percent over the same period.
In Lima and Amman, stocks are even in positive territory.
Mainstream emerging markets such as South Africa and Turkey have been at the receiving end of foreign capital flows over recent years and consequently have been hit hard by the credit crunch sparked off last year by huge U.S. mortgage losses.
"Many frontier markets are small and relatively undiscovered so they have not been touched by hot money in the way their more developed counterparts have," said Slim Feriani, Managing Director of London-based Progressive Developing Markets.
THE NEXT STEP
The definition of "frontier markets" is far from precise, encompassing a diversity of economies ranging from oil-rich Kuwait to impoverished cocoa producer Ivory Coast.
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