One of the things that frustrates us when we are researching a new stock idea, or updating our knowledge of a particular market is how scarce comparable information is for Frontier Markets. Be it on the internet, or on more sophisticated services like Bloomberg, comparable data is few and far between for Frontier Markets’ countries.
That brings us to the topic of today, which is, what are the main components of imports and exports in the markets we cover? How dependent is a particular country on a particular commodity or product? The closest we get, is a wonderful open-source project from MIT, The Observatory of Economic Complexity which provides useful visuals on the subject, as well as other economic data.
We have done a bit of work on this subject with our oil sensitivity piece. We used import and export data from the website to look at what the main drivers are in terms of exports and imports for Frontier Markets. Of the 61 countries we cover, there are 50 products which are within the top 5 import and top 5 exports. At the bottom of this page, you will see a table which lists the average % of exports/imports that each product represents within our investment universe.
The table below lists the countries with the highest and lowest concentration of total exports in their top 5 exports. The radar charts that follow below, provide some explanation as to where this concentration stems from.
As you may intuit, the countries with the most dependence on their top 5 exports are dominated by oil-exporting countries. You would expect that a well-diversified developed economy would not have a concentration in any particular commodity. The bottom 10 list shows that, where the majority of countries are fairly well-developed such as Bosnia, Serbia, Croatia, and Argentina. However, there are some interesting names there as well such as Uganda, Guatemala, Kenya, and Syria.
The radar charts below showcase the top 5 and bottom 5 as far as export concentration goes.
Click on the picture to make it larger. The shaded beige regions have the highest concentration, and the white regions have the lowest concentrations. You can see that Guatemala and Uganda are surprisingly diversified and therefore far more resilient than you would expect for economies of their size.
We have also provided the same data in the table below for imports concentration. This is the data that drove our work on how sensitive different economies are to changes in the oil price.
Below, we have provided radar charts for the top 5 and bottom 5 from an imports’ concentration perspective.
Many of the countries with a high export concentration also have a high import concentration. In most cases this is because an economy tends to develop its export diversity alongside its import diversity, as a concentration of exports generally requires a concentration of imports that a inputs for the said exports.
When investing, we think it is important to know what drives different regions and economies. We do recognize however, that what drives an economy is not what drives a particular stock market. For example, Qatar lives and dies by oil, but its stock market’s capitalization is only 16% weighted towards energy companies. That being said, there are innumerable secondary links, and even service-sector employment is connected to energy in one way or another in Qatar.
There are also numerous surprises to be had, for example did you know that Cambodia’s #2 export in terms of monetary value is stamps? Its ridiculous, but true. We have done this analysis for all 61 countries, but have not provided it in an effort to make the post moderately intelligible. If you are curious about a specific country though, please do let us know.
The table below looks at what the average % of imports and average % of exports each category of product had within out Frontier Markets’ universe.
|Item||Type||Average Imports||Average Exports|