4 Frontier Markets Where Liquidity Is Often Underestimated 1

Templeton’s Hardenberg on Frontier markets liquidity

Another interesting point that Carlos Hardenberg, director of frontier markets at Franklin Templeton Emerging Markets Group, made during his recent interview with Citywire Selector was concerning liquidity in frontier markets. These markets, often considered in isolation, seem illiquid compared to their emerging market (EEM) (VWO) peers. However, “if you truly have a global approach and you include all of the frontier markets in your universe, they would look much better than what many people actually think,” said Hardenberg. Currently, daily turnover for the frontier (FRN) (FM) space is $2.2 billion, and the asset class boasts a market cap of $1.6 trillion, noted Hardenberg.

Within the frontier space, markets such as Saudi Arabia (KSA), Pakistan (PAK), Vietnam (VNM), and Nigeria (NGE) offer substantial liquidity (as charted above).

Frontier markets which offer good liquidity

In our article, this market offers twice the liquidity of all other frontier markets combined; we shared Acadian Asset Management’s SVP & portfolio manager, Asha Mehta’s stance on Saudi Arabia (KSA). Saudi Arabia currently is a very large, liquid and investable market. “The liquidity is huge compared to other frontier markets (FRN) (FM); the liquidity offered by the Saudi Arabian market is more than twice the liquidity of all the other frontier markets, combined,” Asha told Frontera. “If Saudi [Arabia] were an emerging market today, it would be in the top 10,” she said, talking in terms of liquidity relative to other emerging markets. Moreover, Saudi Arabia has its epic Saudi Aramco IPO coming up in 2018. While the proposed public listing may currently be facing certain issues, there’s no denying that it would be the biggest IPO in the history of public markets.

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Pakistan is another (former) frontier market with decent liquidity. The economy’s capital market also has compelling valuations with room for investment. The economy was recently upgraded to emerging market status by the MSCI.

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