Stocks that still appeal in Bangladesh

Economies that are defined as “frontier” offer signficant growth and diversification opportunity for investors, but play second fiddle to those neatly indexed under the “emerging” category.

So says Pradipta Chakrabortty, who manages of Harding Loevner Emerging Markets Fund (HLMOX). In a video interview with Barron’s, Chakrabortty makes the case for Nigeria, Kenya, bangladesh_stocks_dha01Bangladesh, Vietnam and Saudi Arabia. These countries tend to be ignored by foreign investors, who own only about 20% of assets on average, he says. Thus they are less correlated to the swings in other markets, making them attractive for diversification purposes.

There’s risk of course, and a big one is the tumult that elections bring. That’s been the case in Nigeria this year. The Global X MSCI Nigeria ETF (NGE) has tumbled more than 22% this year following a changing of the guard. The Market Vectors Africa ETF (AFK) is down 23% this year, and the SPDR S&P Emerging Middle East & Africa ETF (GAF) is down 14%, while the iShares MSCI Emerging Markets ETF (EEM) is down 15%.. But last year, he points out, Nigeria was down while a frontier market in Africa that gets much less attention, Kenya, was up.

Selloffs provide opportunities for long-term investors in frontier markets. Chakrabortty likes individual companies where the return on equity is high (a Saudi retailer), future growth in earnings is promising (a Nigerian cement producer) and young populations should result in growth for consumer-oriented businesses (a Bangladesh snack seller.)

-Dimitra DeFotis, blogs, barrons.com

 

 

 


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