Big Potential in Small Developing Markets
Stocks in the smallest developing markets are beating larger peers by the most in almost five years, and Templeton Asset Management's Mark Mobius says the rally will continue. The MSCI Frontier Markets Index rose 11% this year, outpacing the MSCI Emerging Markets Index by nine percentage points, the widest gap since 2005's second quarter. The gauge of shares from Ukraine to Vietnam trades for 1.5 times net assets, a 29% discount to the MSCI emerging index, which is dominated by Brazil, Russia, India, and China. Frontier markets are outperforming even as earnings estimates for those markets are forecast to trail those of so-called BRIC nations. The estimates ignore the boost from rising commodities and consumer demand, says Mobius. Nigeria, Africa's biggest oil producer, is one of the most attractive, he says. Nigerian Breweries was among the 10 largest holdings in Templeton's Frontier Markets Fund (TFMAX) as of Dec. 31.