How to invest in frontier markets

Frontier markets can be extremely risky, but they offer access to exotic stocks in rapidly developing countries

Saarbrucken bridge and Sameba Cathedral in Tbilisi, Georgia
(Image credit: Getty Images)

The investment world loves to put stocks and bonds into nice, simple “boxes”. Sometimes, though, the labels are misleading, and so it is with frontier markets. The idea seems simple. These exotic investment destination countries represent the “frontier” and even have their benchmark indices, such as the MSCI Frontier Markets index. Dig a little deeper, though, and what constitutes frontiers seems haphazard. In order to make it into the emerging-markets index, a stock market needs to be “reasonably” liquid, open and somewhat transparent.

If it doesn’t tick all those boxes, it could be relegated from the emerging-markets sector to the frontier one, even though some of the countries in the latter box seem misplaced. Take Vietnam, for instance. I was travelling there only last month, and I can’t see that many differences between Vietnam, the Philippines, Malaysia and Indonesia, yet the last three of these proudly Asian and capitalist countries are officially designated emerging markets and Vietnam isn’t.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.