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Frontier markets are the so-called next emerging markets. While investing in emerging market economies like Brazil, Russia, China, India takes a strong stomach, investing in frontier markets require nerves of steel. Frontier markets are those lie outside of the realm of emerging market investors and they can be considered the “Wild West” of the investment world.

Some of the frontier markets include the middle eastern countries such as Dubai, Saudi Arabia, the countries of Sub-Saharan Africa such as Nigeria, Burundi, etc., Asian countries such as Philippines, Indonesia, etc. and Latin American nations of Colombia, Costa Rica, etc. These markets started to appear in investing universe in 2007,2008 when some global investors looked for much higher returns.

In this post lets review four stocks from such markets.

1.Banco Latinoamericano de Exportactns SA (BLX) is “a supranational bank originally established by the central banks of Latin American and Caribbean countries to promote trade finance in Central and South America and the Caribbean (the Region). The Bank operates under the commercial name of Bladex” based in Panama City, Panama. The current yield is 8.85% and the bank has a market cap. of about $301 M. BLX has performed relatively well in the last 52 weeks since it is down only 36%. Out of the30.6 M shares outstanding 57% is held by institutions.

2. Philippine Long Distance Telephone Co (PHI) is a telecom provider in Philippines with about 32 million subscribers. Last year the company had a total revenue of $1.4B and revenue has grown at a rate of 17% annually. PHI pays a dividend of 6.65%.

3. Colombia-based petroleum company EcoPetrol SA (EC) was listed in the New York Stock Exchange last September. EC has a dividend yield of 5.91%. EcoPetrol “is among the top 40 oil companies in the world and the four chief oil companies in Latin America. Besides Colombia, where over 60% of domestic production is concentrated, the Company is involved in exploration and production activities in Brazil, Peru and the United States (Gulf of Mexico).”

4. The financial services holding company Creditcorp Ltd (BAP) operates in Peru. BAP provides commercial banking, investment banking, insurance and retail banking. The current yield is 3.50%. Annual revenue growth in the last 5 years is 20.5% and the dividend growth is 45%.

For a few frontier market closed-end funds and ETFs checkout my earlier articles A Few Frontier Market Investment Ideas and A Look at Four Frontier Market ETFs

written by David

The developed markets are in the bear’s grip for many months now due to the credit crunch. Investors looking for better returns went to emerging markets like Brazil,India, China, etc. last year and even early this year.But that strategy is not working anymore since the emerging markets have plunged as well.My friend Vlad highlights some of the emerging market indices in the article titled Emerging markets indexes.

So this year investors are going to unusual places to invest. These are countries like Vietnam, Egypt,Peru,Indonesia,Romania, etc. Together these extremely risky markets are called “Frontier markets”. Already this year, ETF providers have luanched many ETFs for the frontier market countries.

In this post, lets look at a few ADRs,funds to invest in the frontier markets:

1.Credicorp Ltd. (BAP)
Credit Corp is a banking company in Peru.The stock has had an incredible year run as the chart shows below.BAP has a PE of 13.05 and a dividend yield of 2.10%. Beta is 1.1.The average annual dividend growth for the past 5 years is 45.41%.

Chart: 5 Year Growth

2.Indonesia Fund (IF)
IF is a closed-end fund now trading at a discount of -11.24%.This a small fund with assets of just $106M.

3.Thai Capital Fund (TF)
TF is a closed-end fund now trading at a discount of -9.93%. This a small fund with assets of just $41M.TF is down YTD some 26%.

4.Turkish Investment Fund (TKF)
This CEF has an asset base of about $111M and it is down some 26% YTD.

5.Philippines Long Distance Telephone Co (PHI)
Telecom company in the Philippines.with a high dividend yield of 5.14%.

Again the above investment vehicles should be carefully evaluated before adding them to a well diversified portfolio.

written by David