Crisis Hits Frontier Stock Markets
With investors dumping what they perceive as risky as the global market turmoil continues, investor enthusiasm for the wilder emerging "frontier markets", such as those in sub-Saharan Africa, has recently faded. Although many experts say that their relative isolation may protect some economies.
The head of emerging market research at Dresdner Kleinwort. has said that the enthusiasm for frontier stock markets and countries has not been bulldozed but it has definitely been put on the back burner.
A United Nations report that was released in late September said that foreign direct investment into developing countries increased over 20 percent to $500 billion in 2007, with Africa attracting a record $53 billion.
But the report also said that some companies were scaling back spending plans and that the same global foreign direct investment would fall 10 percent this year. Some funds are down roughly a third so far this year. Fund monitor EPFR has said that global emerging markets equity funds have lost more than 12 percent of their value last week alone, which is their worst performance since tracking began in 2002.
That being said, so far, the impact on frontier markets, and the funds and ETFs that trade in them, has varied across the frontier countries and asset classes. Wisdomtree funds have done well. Continue.
While Sri Lanka's stock exchange has lost around 10 percent of its value since early August, the primary reason is said to be impact of war with Tamil Tiger rebels combining with local and global economic issues. Also, Nigerian stock markets have fallen due to both local and global liquidity issues as well as falling oil prices.
On the other hand, Kenya's stock market has declined, but the local bond market has been relatively unaffected.