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Frontier Markets Critical for Diversification, New Research Finds

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Emerging market

Latest research with institutional investors and wealth managers across Europe who collectively manage over $520 billion in assets under management, identifies frontier markets as vital for diversification.

The study, which was conducted for Dragon Capital, the largest independent asset management company in Vietnam, reveals more than half (53%) strongly agree and 46% slightly agree that frontier markets provide attractive diversification benefits from emerging and developed markets.

The majority of investors (85%) also agree that frontier markets offer some of the best opportunities to find hidden gems in the investment management world. More than two-thirds (67%) agreed, 18% strongly agreed.

Interest in frontier markets reflects impressive performance last year thanks to major changes in the investment universe.

A shift from oil-price sensitive stocks based in the middle east, to manufacturing and expert led companies in Asia, contributed to returns from the MSCI Frontier market index of 20.09% in 2021, and an outperformance over the MSCI All World Index of 1.05%**. Meanwhile, Vietnam’s market returned 39% in 2021.

When asked which Asian market offers the most attractive long-term returns for investors, 26% chose Vietnam.

In terms of which  factors were most important when selecting a frontier fund manager, more than nine out of ten investors said track record (95%) and fund longevity (93%).

Most important factors when selecting a frontier manager Percentage of professional investors who believe this is important
Fund manager track record 95%
Longevity of fund 93%
Strong focus on ESG 88%
Liquidity 88%
Size of the fund 85%
Fees 83%

 

Dr. Tuan Le Anh, Deputy CIO at Dragon Capital, Vietnam’s largest asset manager, said: “Frontier markets have high rates of GDP growth and enjoy periods of rapid urbanisation, growing middle class formation, increased domestic consumption, and elevated levels of foreign direct investment, all of which make for attractive investment opportunities.

And as respondents to the survey have found, the lack of coverage of companies in frontier markets means there are ample opportunities to find hidden gems.

As frontier markets continue to evolve and embrace digital technology, we expect to find an ever-larger pool of attractive stocks.”

Dr. Tuan Le Anh continues: “When investing in frontier markets it is beneficial to have boots on the ground in order to help mitigate risk, and so naturally it makes sense for investors to prioritise fund managers with a proven history and demonstrable experience of delivering consistent returns.”

 

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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