Top 3 Frontier Markets In Asia To Invest In

Money Matters / Investing

Top 3 Frontier Markets In Asia To Invest In

Two are beneficiaries of the manufacturing shift in Asia and one is set to receive large amounts of investment from China – here’s a look at what makes these countries attractive to investors.

Written by Xiou Ann Lim on 16 May 2017

Now that you know why investing in Asian frontier markets can be really rewarding, you probably want to start with the very best. We break down the macroeconomic indicators as well as the returns you could potentially earn from these top 3 frontier markets in Asia: Pakistan, Bangladesh, and Vietnam.

Investing in Pakistan

Top 3 Frontier Markets In Asia To Invest In

Why invest: The MSCI (Morgan Stanley Capital International) – which provides stock market indices to measure stock performance – today officially announced that Pakistan will be leaving behind its frontier market status and graduating to the Emerging Markets Index, effective 1 June this year.

Riding on the back of this, the Pakistan Stock Exchange has been at an all-time high all week – illustrating how investing in a frontier market like Pakistan can be pretty rewarding.

But apart from that, Pakistan is also set to benefit from Chinese investment – China has reportedly set aside about USD40 billion for this – spurred by the China-Pakistan Economic Corridor (CPEC) undertaking.

2016 performance (KSE100): 45.68% (*Source: Bloomberg, returns in local currency)

Investing in Bangladesh

Top 3 Frontier Markets In Asia To Invest In

Why invest: Another market to benefit from the manufacturing shift in Asia is Bangladesh, which has a thriving textile industry. When the South Asian country’s export earnings hit a record high in December 2015, its burgeoning apparel industry accounted for more than 83% of those earnings – according to its Export Promotion Bureau.

“Bangladesh is a small country, but it has a lot of potential – its low income base means low wages in manufacturing, its 6.5% GDP growth is promising, and there is a lot of potential for developing infrastructure,” says Thomas Hugger, chief executive officer of fund management company Asia Frontier Capital.

Apart from that, a recent market research report by Boston Consulting Group estimates that about 40 million Bangladeshis “will make the leap from poverty to the entry rungs of the middle class by 2025”. This will set it on the path to great growth in discretionary consumption, which also bodes well for its economy. 

2016 performance (DSE Broad): 8.78% (*Source: Bloomberg, returns in local currency)

Investing in Vietnam

Top 3 Frontier Markets In Asia To Invest In

Why invest: Ranked the top frontier market in the world for investors by Bloomberg Markets in 2013, Vietnam is still going strong. Benefiting from the downshift of the manufacturing sector in countries such as China, Japan, and Korea – Vietnam is seeing a strong inflow of foreign direct investment.

“With its geographical proximity to these countries, it fits well in the supply chain as it is politically stable and has the appropriate infrastructure,” Hugger says. It also has other attractive characteristics to help boost the manufacturing industry – such as low wages, high productivity, and a young labour force.

Apart from that – like Pakistan – Vietnam is also widely expected to make its way to attaining an emerging market status, which will give investors a boost in their portfolios.

2016 performance (VNINDEX): 18.36% (*Source: Bloomberg, returns in local currency)

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