In the Bloomberg Markets ranking of the most promising emerging and frontier markets for investors, countries were classified as emerging or frontier based on their presence in the FTSE Frontier 50 Index, the FTSE Emerging Index, the MSCI Frontier Markets Index, the MSCI Emerging Markets Index, the S&P Frontier Broad Market Index or the S&P Emerging Broad Market Index.
Both rankings, published in the March issue of Bloomberg Markets, included the following data for each country: International Monetary Fund forecasts of GDP growth, inflation, government debt level and total investment; World Bank demographic and development data measuring literacy, age of population, labor participation and infrastructure levels; and Bloomberg financial markets data about the liquidity and price- earnings ratio of the stock market plus the volatility of the local currency.
We also looked at the country’s position in outside rankings: the World Bank’s Ease of Doing Business Index, Transparency International’s Corruption Perceptions Index and the Wall Street Journal/Heritage Foundation’s Index of Economic Freedom.
The frontier markets ranking included an additional variable: net energy imports as a percentage of all energy used.
We used this World Bank data to determine these countries’ vulnerability to volatile energy prices. Countries that rely heavily on energy exports or imports were considered higher risk and therefore earned fewer points for this category.
For both rankings, countries were awarded points based on their relative performance in each category. The worst- performing country received a score of zero, while the best- performing country received the maximum number of points assigned to that variable. Scores for all variables were summed, with a range for the final score being 0 to 100.
For the frontier markets, greater weight was given to the macroeconomic forecast data from the IMF because such data are more reliable than survey or other data in those countries.
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