Here at InvestAsian, we focus on frontier markets and emerging economies. We’re convinced these are the best places in the world for globally-minded investors. Why though?
Nations are broken down into one of three different categories based on their stage of development.
Developed markets, including South Korea and Japan, are generally the weakest from an economic perspective. Their population growth is tepid or even negative. They’re already urbanized, elderly, and and becoming less relevant.
Such markets are often tightly regulated while entry barriers are difficult, if not impossible to overcome. Large multinational firms already exist in any sector you could possibly think of.
Emerging markets, such as Thailand and Malaysia, are going through change at a much faster pace compared to developed markets.
Manufacturing is usually a big part of emerging markets. It’s not all positive though. Foreign investment is peaking, and local firms are just starting to expand, finding their own opportunities abroad.
Likewise, emerging markets are fully integrated into the global system already, and therefore, rely on developed nations in order to sustain their continued growth.
They aren’t shielded from any financial crises that the rest of the world is subject to… which doesn’t make emerging markets ideal if you’re seeking an uncorrelated asset.
Beyond these are frontier markets: countries like Vietnam and Cambodia. Places where rapid growth and high potential for returns have only recently started.
Frontier markets are on a different level, and we’ve devoted a lot of resources to figuring out how they have been able to consistently outperform the rest of the world economy.
WHY ARE FRONTIER MARKET INVESTMENTS UNIQUE?
A middle class is just now beginning to form in frontier markets, which makes them great for long-term investors. Furthermore, strong demographic trends means that frontier markets are driven by internal growth factors moreso than the global economy’s performance.
The types of businesses that you may take for granted in your home country, for example, convenience store chains and drive-thru restaurants, might not even exist yet.
You’re able to become the “first mover” way easier when investing in frontier markets compared to anywhere else. Because of this, frontier markets are perfect for scrappy entrepreneurs and international corporations alike.
First movers are able to gain the most in practically any situation, and as an investor, you’ll improve the chances of success by doing business in a frontier market.
In fact, my own story is a testament to why frontier markets are ideal for business. I started a property fund in Cambodia fresh out of university. We began with a few hundred thousand under management, and it quickly grew into a multi-million dollar business.
Just try bootstrapping a property fund in a place like Singapore or Hong Kong nowadays! Maybe that would have been possible decades ago, but not anymore.
Up until 2018, Cambodia didn’t even have a global convenience store chain. Circle K and 7-Eleven recently entered the market and don’t have any real competition besides each other. Nowadays, in 2023, both companies are reaping the rewards from being first-movers.
Frontier markets are also far less correlated with major economies like Europe and the United States. In fact, some of them skipped the past three global recessions.
Just to provide two examples, neither Vietnam or Bangladesh have had a recession in 30 years. They skipped the Asian Financial Crisis during the 1990s, missed the tech bubble of the early 2000s, and outgrew the recent 2008 Global Recession.
In the 21st century, the world’s economies depend on each other. 7-Eleven and Burger King can be found almost anywhere on the planet. Because of this, when the United States or Europe gets sick, developed and emerging markets do as well.
Frontier markets are often exceptions to this rule. Cambodia, for example, doesn’t rely on foreign capital from McDonald’s because McDonald’s doesn’t even operate in the country yet.
DO FRONTIER MARKET STOCKS
AND PROPERTY AVOID RECESSION?
Of course, there’s no such thing as a truly recession proof economy. “Past performance is not a guarantee of future results” and anything could happen. Regardless, a good frontier market is about as close as you can get.
To summarize: frontier markets have a very rare combination of risk and return. They’re not only growing three times faster than your country is, but they probably won’t be included in the next global recession either. There’s one minor downside though…
Investing in frontier markets usually isn’t easy. It’s the main reason why these places aren’t swarmed with people scooping up assets already. You’ll surely find entry barriers… just not ones set up by the competition.
Instead, your obstacles could be in the form of language barriers, cultural ones, or limits set up by the government.
Tasks that would be simple in most countries, such as opening a brokerage account or extending a visa, are often difficult in frontier markets. Let alone finding an honest real estate agent in Myanmar or researching stocks in the Philippines.
Plus, most people don’t want to live in Myanmar and spend valuable time figuring everything out on their own.
What’s the catch of investing in frontier markets? Well, it’s simply a matter of doing proper research and correct implementation.
That’s the reason why we created InvestAsian. Asia’s frontier markets have extraordinary potential, and we’ve spent over a decade learning how to profit from them.
Now, let’s take a look at several of the world’s fastest growing countries. You’ll find that many of them are frontier markets.
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