Another year is in the books and we wanted to thank our readers for a year that saw us hit new highs in views and content produced. As you settle in for the holidays, take a look at five of our most interesting articles from this year, and have a happy new year!
Without further ado and in chronological order, here are our 5 picks:
“Yangon Exchange is planning to launch in October 2015. This exchange will be a typical public equities exchange, and has already engendered considerable interest. The Tokyo Stock Exchange (TSE) and Daiwa Group are responsible with the creation of the exchange, and of implementing internationally recognized best-practice for the exchange. It will take many years for the exchange to establish itself and for Myanmar’s corporate culture to evolve and conform to international standards. That being said, it will also be a great opportunity to invest in a country with immense potential and a population over 60mm (the 24th most populous country in the world).”
“We touched on this in a previous post but it bears repeating: the MSCI Frontier Markets 100 Index does not resemble a global frontier market index. As of April 2014, almost 58% of the index was concentrated in three extremely wealthy Middle Eastern countries: Kuwait (20.37%), United Arab Emirates (18.99%), and Qatar (18.51%). Nigeria was the fourth largest country weight at 11.24%, which means that over 69% of the index is concentrated in four countries, three of which have GDPs per capita rivaling developed countries.
It is absolutely true that Middle Eastern stock markets, led by Dubai and Qatar, are on fire this year [Edit: Ouch]. But for a more rounded view of global frontier markets, check out our Market Dashboard. Frontier markets around the world are up an average of 5.6% or 2.5% in USD this year – still great, but not as much as the MSCI is saying, and with large variance across markets.”
“Is it safe to invest in that country?
This is a central question for any frontier investor looking to deploy capital in small and developing economies. There is no point in pursuing double-digit growth and extremely undervalued companies if there is little chance you will ever see your money again. While most investors value a “boots on the ground” approach by visiting any prospective countries before committing any new funds, it is impractical to visit multiple countries and views can be compromised by small sample bias.”
“We received the prospectus for PPWSA and it was a mess. Numerous typos, errors and sentences that did not make sense. Semi-annual reports that were only released in Khmer and a website that was a nightmare to navigate. We think that at least three years prior to an IPO, a company should be operating to a level of governance that is expected for a public firm. This includes an investor relations team, compiling annual reports, and senior management being trained in how to take analyst questions and prepare for investor calls. None of this was done in the case of PPWSA. It is important to note that a memorandum of understanding for establishing the Cambodian Stock Exchange was signed in 2006, a full 5 years prior to PPWSA’s IPO. Our expectations are not unrealistic on this basis. Telecom Cambodia is encountering similar issues and that is the main reason why it has yet to list.”
One of the initiatives which has gotten very little attention is the UN’s Sustainable Stock Exchanges Initiative (SSE). The focus of this initiative is a peer-to-peer learning platform for stock exchanges around the world to improve ESG factors and ultimately, performance. They publish a ‘Best Practices’ report which is quite useful.