Frontier markets carry rewards and risks

Article Excerpt

More than two centuries ago the New York Stock Exchange was created under a tree to facilitate trade among a small list of U.S. companies. China was considered a “frontier market” less than 40 years ago. Today, it and the U.S. are the world’s two largest economies. Some frontier markets did not exist a decade ago. However, many now benefit from the technological advancements that support growth and development and can propel their rapid climb into the family of emerging markets. What are the frontier markets? There is no universal definition of what constitutes frontier markets, but they generally consist of countries with economies and financial markets that are less developed than those of emerging-market countries. Frontier markets are often lower-income developing countries, but that’s not always the case. In fact, the per capita gross domestic product of frontier markets range from high income (Kuwait: $69,700 per year—ranked 12th in the world) to low (Kenya: $3,500). Index providers, such as MSCI and S&P, list between…