Franklin Templeton: The Learning Curve For Frontier Markets Is Steeper 1

The frontier markets’ learning curve is steeper

“The frontier markets learning curve is steeper” than emerging markets, said Franklin Templeton’s Carlos Hardenberg over a Citywire Selector interview. What this means is that it took many more years for companies in emerging markets (EEM) (VWO) to move up their standards to the match the developed markets (EFA) (VEA). In contrast, frontier markets (FRN) (FM) are accomplishing the same in much lesser time. “The frontier markets are looking up to the developed world and have been moving in the same direction but at a much faster pace,” said Hardenberg.

Frontier markets rise at a faster pace

Above is a chart depicting data that serves to validate Hardenberg’s point. Frontier economy capital markets, as tracked by the iShares MSCI Frontier 100 ETF (FM), have moved up faster than the emerging economies-tracking iShares MSCI Emerging Markets ETF (EEM).

The iShares MSCI Frontier 100 ETF (FM) has returned 18.02% to investors so far this year. Within the frontier markets universe, stock picks from Uruguay, Argentina, and Bahrain in the FM portfolio have done particularly well so far in the year (as of May 26). These markets have returned 68.52%, 47.83%, and 45.09%, respectively YTD. Stocks from FM ETF that have led performance so far this year include:

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US TickerNameCountryYTD Return %

(as of May 26)

Oando PlcNigeria87.98%
PAMPampa Energia SA ADRArgentina81.01%
UBKZFUnited Bank for Africa PlcNigeria80.59%
TGSTransportadora de Gas  del Sur SAArgentina77.27%
ARCOArcos Dorados Holdings Inc.Uruguay68.52%
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