All of the frontier market regions posted positive returns, among which Europe outperformed while Asia lagged. A majority of the countries posted small positive returns as well. Mozambique, Paraguay, Cameroon and Angola led the outperformers.
At the other end of the returns spectrum, Ecuador underperformed by the most, followed by Bolivia and Ivory Coast. On the ratings front, Belize was downgraded, but it restructured and was upgraded again by Standard & Poor’s.
Overall, there continues to be some opportunities for more stable and – in some countries – improving emerging and frontier market fundamentals, partially helped by stable commodity prices, particularly oil but also industrial metals.
However, this improvement in fundamentals is balanced against valuations that are closer to fair, and a potential increase in risk from US policies – or the failure to deliver – under president Trump. This makes the overall assessment cautiously constructive.
In the medium term, US policy news, and developments in China and European politics, could continue to pose some risks to the region.
Girish Patil is a senior portfolio specialist at NN Investment Partners
