Best and Worst Frontier Markets in Q1 of 2014

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Frontier markets in 2014 have performed admirably but with a wide range of performance depending on region. Overall they are up 4.54% in local currency terms, with not a single region we monitor in the red:

FM Q12014 Overall

While equity markets have done well, this is partly as a result of depreciating local currencies, down almost 3% on the year so far. There has been a large discrepancy between the performance of different regions, with South and Southeast Asia leading the way but Central Asia and the Americas lagging behind.

Now for a look at the best and worst performing frontier markets so far this year. Since we track almost 60 different countries, we took a closer look at the top and bottom five markets in the first quarter of 2014.

Best Performing Frontier Markets in Q1, 2014:

Best Frontier Markets Q1 2014

1. Bulgaria

Bulgaria has traded well all year and sits number one in the rankings this year. The Sofix Index had been trading sideways for years after losing about 85% of its value from the 2008 highs, but market confidence looks to be returning. No single catalyst has propelled this move but reasons cited for this move include local investors’ increasing risk appetite, higher corporate earnings, and the ongoing privatization of the stock exchange.

2. Egypt

The EGX30 Index has been on a tear ever since Mursi was ousted and the markets bottomed in late June of 2013; the markets have rallied almost 90% since in a classic example of investors moving in to bargain hunt post turmoil.

3.Vietnam

After rallying 20% in 2013, momentum has carried over to 2014. Government reform, particularly on foreign-ownership rules, is one of the main reasons for this move as is reform in the banking sector. The recovering economy led by the export sector has also been a boon to the market.

4. Pakistan

The Karachi Stock Exchange 100 Index has been rallying since 2009 and has increased by over 450% since the lows, hitting new all time highs this month. Furthermore, the PKR is the best performing currency on our dashboard and possibly the world, appreciating almost 7% YTD.

5. Cyprus

Although it is off it’s +45% YTD highs from last month, Cyprus still rounds out our list of best performing frontier markets in this first quarter. For more information, check out our previous post.

Worst Performing Frontier Markets in Q1, 2014:

Worst Frontier Markets Q1 2014

1. Ukraine

Without accounting for the currency move, Ukraine is one of the best performing equity markets in the world this year, with many bargain hunters looking to buy low during the current political situation. However, the currency has depreciated over 30%, erasing all gains.

2. Zimbabwe

Zimbabwe has once again been suffering from governance concerns under the reign of Mugabe. Diamond and gold reserves have disappeared, and hyperinflation in the nation has led to nine different currencies being accepted as legal tender now. Problems abound across the economy.

3. Argentina

Another country suffering from capital flight and a tumbling currency. Inflation is sky-high (estimated to be 45% for 2014) and a 19% devaluation in the peso in January has cut into stock market returns despite their move higher in local currency terms.

4. Nigeria

Nigeria has been embroiled in a scandal over missing oil revenues. The central bank minister claimed that $50 billion was missing from state coffers and was promptly suspended for his announcement, eroding confidence in local markets.

5. Peru

Peru’s stock indices performed terribly in 2013 and have continued to slump in 2014, with the Lima General Index down almost 10% in March. The index remains linked to the performance in commodities like copper and gold; copper is down over 15% YTD and while gold is up over 7% YTD, it did fall over 5% in March.

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