Source: | Thursday, 21.02.2013.| 14:17
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Financial Times advises investors to invest in Serbian and Croatian capital markets

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The London Financial Times has pointed to the potential of so-called Frontier Markets, among which are Croatia and Serbia. According to this newspaper, aforementioned markets (there are also Vietnam, Pakistan, Nigeria, Sri Lanka, Romania) show signs of recovering in 2013 – after a long period of underperformance stretching back to 2009, and the frontier market index has outpaced its mainstream emerging market equivalent by a significant margin in the weeks since the start of January and reported an 8.3 per cent return over this period against a 1 per cent return for Brazil, Russia, India, China and the other big emerging markets.

This improvement in performance may not be drastic, but bullish equity strategists argue that frontier markets merit a glance now that they have swung into positive territory, FT reports.

- People have realised that this forgotten space within global equities is worth a look - says Slim Feriani, manager of the Advance Frontier Markets fund.

- Some of these markets are the cheapest they have ever been - he notes and goes on to say: “You’re getting decent, if not strong economic growth from a number of frontier countries and you’re also getting earnings growth in the range of 15 to 20 per cent plus healthy dividend yields of 4 to 5 per cent.”

The case for investing rests largely on the strength of the dividend yields frontier markets are throwing up, FT writes.

- We have argued that in a low interest rate world, dividend yield is likely to be an increasing focus for investors – and this clearly plays to the strengths of frontier markets - wrote John Lomax, an investment strategist, in the HSBC report.

Strategists are already taking overweight positions in both consumer discretionary and financial sectors across frontier markets.

- Emerging markets have already passed through the early stages of development, and growth rates have eased back. Frontier markets are in the very early stages, where growth rates tend to be higher - says Nick Wilson, chairman of London-listed Qatar Investment Fund.

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