Concerns about the Federal Reserve tapering its monthly bond-buying program and a rise in interest rates got investors antsy. The concern was that this could cause a reversal in capital flows causing problems for many of the emerging markets that run huge deficits.
There were also concerns about an economic slowdown in China, as well as risks associated with elections in many emerging economies.
But the frontier markets have been thriving. Frontier markets, often dubbed pre-emerging markets, have lower market capitalisation than emerging markets, and the assumption is often that if emerging markets are going down, frontier markets would fall further.
But this hasn’t been the case.
BlackRock’s Russ Koesterich has previously pointed out that frontier markets “have been relatively insulated from bouts of capital flight thanks to their robust growth, still low level of foreign ownership and pegged currencies.”
Oppenheimer’s John Stoltzfus has published this chart that shows that the MSCI Frontier Market index was up 2.6% year-to-date, while the MSCI Emerging Markets index was down 3.6%. The Nasdaq Composite has been the only major benchmark to outperform the MSCI FM, rising 3.1%.