1Semana·

Frontier boom: Where early birds get the best returns

Hello dear Getquin Community,

today I would like to introduce you to the exciting topic frontier markets which is currently on everyone's lips. Anyone who follows the flow of money will quickly realize that there is no way around these markets in the future. After thorough research, I present to you 10 shares and 5 ETFs with enormous potential.

Significance

Frontier markets are the bridge between emerging and industrialized countries. The MSCI Frontier Markets Index comprises 233 companies from 28 countries and covers around 85 % of the freely tradable market capitalization. They are still at the beginning of their capital market development, but this is precisely where the appeal lies.

Development and potential

In 2024, the index achieved a return of just under 10 % in USD. Individual companies such as Kaspi.kz, OMV Petrom and Vinhomes are already generating billions in profits and proving that frontier markets are no longer an exotic fringe phenomenon, but platforms for sustainable growth. For investors, this opens up opportunities for uncorrelated returns and the chance to enter future emerging markets at an early stage.

Sectors and regions

The strongest segments are Banks & Fintechs (Kaspi.kz, Attijariwafa, Banca Transilvania), Commodities & Energy (Kazatomprom, OMV Petrom), Real Estate (Vinhomes) and Industrials & Pharmaceuticals (Hoa Phat, KRKA). Vietnam, Kazakhstan, Romania and Morocco dominate regionally, while Africa offers diversification through broadly diversified indices.

The largest listed players

$KSPI (-0,25 %) Kaspi.kz (Kazakhstan, Fintech & E-Commerce)

$SNP OMV Petrom (Romania, energy)

$VHM Vinhomes (Vietnam, real estate)

$ATW Attijariwafa Bank (Morocco, banking)

$TLV Banca Transilvania (Romania, Banking)

$KZAP Kazatomprom (Kazakhstan, uranium production)

$KRKG (-0,12 %) KRKA (Slovenia, pharmaceuticals)

$HPG Hoa Phat Group (Vietnam, steel/industry)

$NLB Nova Ljubljanska Banka - NLB (Slovenia, banking)

+ High-growth mid caps from Vietnam and Africa

Top 5 frontier ETFs

$XFVT (+0,41 %) Xtrackers FTSE Vietnam Swap ETF (WKN: DBX1AG)

$DX2Z (-0,25 %) Xtrackers S&P Select Frontier Swap ETF (WKN: DBX1A9)

$XMKA (-1,01 %) MSCI EFM Africa Top 50 Capped Swap ETF (WKN: DBX0HX)

$FM iShares MSCI Frontier and Select EM ETF (Ticker: FM, US)

$EMFM Global X MSCI Next Emerging & Frontier ETF (Ticker: EMFM, US)

Takeaway

Frontier markets are volatile, but their combination of growth, diversification and high margins makes them a strategic building block for any forward-looking portfolio. However, many shares and ETFs are difficult to access in Germany. The key question: who will recognize the potential of these markets early enough and position themselves before they are discovered by the mainstream?

Source: MSCI Frontier Markets Index Factsheet, company reports, podcast All on equities (13.08.), image material: Bondguide.de

13 Comentarios

Epi@Epi

1Semana

Thank you for reminding us of this exciting topic!

But a little more and correct background would have been good. Frontiers are not a "bridge" between EM and industrialized nations. They are the stage BEFORE emerging markets, i.e. the markets you can just invest in. Wild West, so to speak. Compared to Kazakhstan, Brazil is an established market.

The frontier markets are highly non-transparent and inefficient. Corruption and arbitrary expropriations are the order of the day. You get paid for the risk, but you should know it well.

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TotallyLost@TotallyLost

1Semana

@Epi or communist, like Vietnam.
You have to ask yourself whether you want to invest in a country that has banned Steam... Steam!

This time the communists have gone too far!

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Elsa E.@EpsEra

1Semana

@Epi Thank you for pointing this out and for your statement. It's really nice to see that people here are intensively involved with this topic. This is exactly what makes a strong community, because constructive and positive criticism ultimately helps each of us a lot and creates the opportunity to discuss interesting topics.
I have already replied to @TotallyLost 's comment about lack of transparency and inefficiency.

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TotallyLost@TotallyLost

1Semana

Interesting topic, but why should you track such inefficient markets with an ETF? I myself am invested via an active fund.
$C084Y2

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Eselai@DonkeyInvestor

1Semana

@TotallyLost exciting. Where can you find it?

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TotallyLost@TotallyLost

1Semana

@DonkeyInvestor I always buy these things via Flatex because they have quite a few trading venues.

You can buy this one in particular on the Munich Stock Exchange and Gettex. 😘

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Elsa E.@EpsEra

1Semana

@TotallyLost
Thanks for the tip, an exciting alternative that I hadn't considered before. You're right, the markets are currently still inefficient, which gives active approaches an advantage. At the same time, major players are already investing in precisely these regions and experience shows that they often have the right instinct. Nevertheless, caution is still required as volatility and low liquidity can quickly cause problems for investors.

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Pawfolio@Pawfolio

1Semana

Thanks!

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Elsa E.@EpsEra

1Semana

@Pawfolio
Dankeschön 😍

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GAR1986@GAR1986

1Semana

Exciting contribution. I'm not a huge ETF fan, but it certainly makes sense here. I didn't have it on my radar! Thank you

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Elsa E.@EpsEra

1Semana

@GAR1986
I'd love to and thank you for your great comment 🤝

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Tim@Tacticus

I also have the $XMKA.

But it is actually more suited to the regional ETFs.

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Elsa E.@EpsEra

@Tacticus
Well recognized, Tim thanks for the hint! The moderators at AAA have nevertheless included the $XMKA ETF in the frontier markets sector and I have therefore also adopted it 😅

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