What are the Safest Frontier Markets To Invest In?

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The first question we get from prospective frontier market investors is always, “Is it safe to invest there?”

To answer this we came up with our Investment Safety Rankings back in 2014. Please click that link to find out a bit more about the indicators we use and why we use them. We just updated our rankings to take into consideration the latest rankings available.

The Safest Frontier Markets To Invest In

With this new data, here are the top 15 safest frontier market countries to invest in according to our rankings. This is out of the 133 countries that we have classified as FM and have at least one ranking out of the three rankings we source data from. For more information on how we’ve classified countries as frontier markets, check out our past post on this subject here.

SafestFMMarketsThree frontier market countries, Estonia, Lithuania, and Chile, are all within the 30 safest countries to invest in in the world, ahead of notable developed markets and the majority of emerging markets. To be fair, all of these frontier markets are relatively wealthy, with a median GDP per capita of over $28,000 USD.

The Most Dangerous Frontier Markets To Invest In

Just for kicks, we took a look at the worst countries to invest in, all of which unsurprisingly qualified as frontier markets:

DangerousFMMarkets2These are the 15 most dangerous frontier markets to invest in, a list which should not surprise many people. Note that North Korea came in at 176 (17 from the bottom, just missing the cut-off). When you’re better off putting your money with Kim Jung Un, then the potential returns need to be impressively high to make it worth your while..

To be fair, the median GDP per capita of this list is under $2000 USD, so 14x smaller than the top 15.

What Regions Look Attractive for Frontier Market Investors?

It’s no surprise that richer countries are generally safer places to invest in given the amount of resources to establish rule of law and an effective government. Here’s a graph of a country’s GDP Per Capita vs their Investment Safety Rank:

GDPvsRankWe’ve omitted Qatar, Brunei, and Kuwait from the sample since their extremely high GDP/Capita skews the graph. But even with them you can see a generally positive trend between these two factors.

So given their GDP Per Capita, two countries stick out as nations that are outperforming their expected safety rank despite very low GDP numbers. Those are Vanuatu and Rwanda, ranked 79 and 81 despite GDP Per Capitas of $2550 and $1807 respectively. While Vanuatu is very hard to invest in given its size and benefits from only appearing on one ranking, Rwanda is a clear stand-out having placed extremely well on both the Corruption Perceptions Index and Ease of Doing Business rankings.

Africa looks to be a promising region if you pick your countries correctly. Ghana is a country that is doing very well in our rankings despite a GDP Per Capita of just $4266 USD. It has a much better Fragile States Index score than Rwanda, and comes in at 69 on our rankings. So for those looking to start a portfolio in African equities, Rwanda (#81), Ghana (#69), and even Namibia (#70) look to be good bets to go along with the much safer Mauritius (#34) and Botswana (#48).

The other region that stands out for frontier market investors should be Europe. Its close proximity, and in some cases membership, to the European Union has laid the groundwork for relatively safe investments. Estonia (#22), Lithuania (#27), Latvia (#31) and Slovenia (#32) lead the pack as four of the top five safest frontier market countries to invest in. But you also have countries like Georgia (#56), Albania (#75), and Armenia (#76) that have placed high in our rankings despite GDP Per Capita hovering around $10,000 USD.

Final Thoughts

We hope these rankings are helpful to you if you are planning to invest in a new frontier market. However, you must keep in mind that they are not set in stone, and are mainly a guideline for investors who are scoping out the best countries to look at. Happy investing!

 

 

 

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