Why you should consider this change in Qatar and UAE’s status

Russ Koesterich, CFA of BlackRock

Qatar and UAE outgrow their frontier status: Investor takeaways (Part 3 of 5)

(Continued from Part 2)

Qatar’s and UAE’s equity markets have increased roughly 47% and 188%, respectively, since the beginning of 2013. As a result of their previous classification as frontier markets, the broad MSCI Frontier Markets 100 Index has risen roughly 32% over the same time period and has outperformed its emerging market (EM) counterpart by about 37 percentage points.

Market Realist – The MSCI Frontier Market Index, as tracked by the iShares MSCI Frontier 100 Index Fund (FM), has given better year-to-date returns than developed (VEA) and emerging markets (VWO), including Brazil (EWZ), India (EPI), and China (FXI). This has primarily been due to the stellar performance of UAE and Qatar equity markets, which have been in boom since early 2013.

The graph above compares the performance of the MSCI EAFE (EFA), MSCI Frontier Markets (FM), and MSCI Emerging Markets (EEM) indices in the past year.

But in my opinion, the departure of these two above average performers, and the other upcoming index methodology changes, is actually good news to frontier market investors.

My sense is that the new portfolio of companies in the index following the rebalancing will more accurately reflect what most people think of when they consider investing in frontier markets.

Market Realist – Read the next part of this series to see why the reclassification of UAE and Qatar as emerging markets should benefit the MSCI Frontier Index.

Continue to Part 4

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