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Frontier markets investors reap rewards.

Investors with strong stomachs and an appetite for exotic countries such as Vietnam, Kazakhstan or Tanzania have been rewarded with good news, as frontier markets turned into more robust investment performance than the more established emerging markets.

In the first six months of the year, the MSCI Emerging Markets index fell 4.4%, while the MSCI Frontier Markets index rose 14.3%. Analysts explained that the outperformance is partly attributed to a lower correlation between frontier markets and the MSCI World and the S&P World indices.

In recent weeks, comments by US Federal Reserve Chairman Ben Bernanke regarding an easing back of the US emergency bond-buying programme made many investors jittery, triggering a sharp exit from equity and bond markets worldwide. However, frontier markets are mostly driven by local investors with a different and often more domestic investment perspective.

Nonetheless, fund managers are still cautious about certain frontier countries, claiming that it may still be early days.

“Myanmar is getting a lot of attention but it is not investable, although we think it will be interesting in the future, like Cambodia and Algeria”, explained Slim Feriani. “The time will come for countries such as Myanmar but we don’t think the risk/return trade-off is there yet. It is the same for Iran and Iraq”, he added.