How big are Frontier Markets anyway?
We are often asked about the size of Frontier Markets? How big is the universe anyway?
We thought it was time to do a brief overview of the size of the market, and the number of companies available for investment.
As our regular readers are aware, we use our Market Dashboard as the basis for our investable universe. If and when we feel another country should be added to our universe, the change is first reflected on our dashboard. Based on the investable universe of our dashboard, there are over 2,000 companies that fit our basic criteria of having a market cap above $50mm USD. This creates a wide and diverse universe of companies to invest in. Even if we refine constraints to companies over a $500mm market cap, there are still 636 investable companies in our universe. It is important to note that certain markets have been excluded from this analysis, due to a lack of readily available information. The notably absent countries are Nepal and Bolivia.
The figure below provides a distribution of companies based on market cap to demonstrate this point.
Figure 1: Distribution of Investment Frontier countries by market cap
There is a significant amount of sector diversity as well, however there are key sectors such as health care and information technology that are underrepresented. This is the norm for frontier and emerging markets. The figure below should really exemplify how unique India is, in its reliance on large, successful IT companies.
Figure 2: Distribution of investable companies by GICS
Lastly, it is important to look at the distribution of these companies by country itself. Figure 3 below provides an overview of how these companies (market cap weighted) are distributed by geography. This is where a skew is apparent. Over 26% of assets are invested in Saudi Arabia, and over 46% of assets are concentrated in the Middle East and North Africa.
Figure 3: Distribution of investable companies by country
We hope this analysis is useful and illustrative of how large the opportunity set is within Frontier Markets. Certainly the ease with which one can invest in these markets and the liquidity of certain names is a challenge, but they are challenges that can be overcome. This market, if it can even be referred to in the singular will only continue to grow and increase in diversity.
As always, if you have any questions, please let us know. We have provided a link to the actual list of companies below.
Table 1: List of Investable Companies in Frontier Markets