LONDON Feb 25 Frontier stock, currency and bond
markets, which were among last year's most favoured assets, are
starting to show cracks as capital flight out of developing
Frontier stocks are still outperforming broader emerging and
developed markets, with Ukraine rallying to the top of the
league table after the installation of a pro-Western interim
leadership there, the following graphics show:
But there are also noticeable laggards among the frontier
economies - those which are at an earlier stage of development
than established emerging markets. Nigerian stocks
, a star player last year, are at the foot of the
frontier league table, dropping 18 percent so far in 2014.
The suspension of central bank governor Lamido Sanusi has
unnerved investors before elections next year.
Currencies are also starting to feel the strain, according
to this graphic:
Many frontier currencies are pegged or managed in a narrow
band and their central banks have preserved them from the worst
of the emerging market storm which has hit freely-floating
currencies such as the Turkish lira and the South African rand
since last May.
But reserves are dwindling and exporters are looking to
remain competitive. This year frontier central banks from Ghana
to Nigeria and Kazakhstan have devalued currencies, moved them
out of their bands or let them fall to record lows.
Frontier debt markets which delivered gains of 5 percent in
2013, are muted this year. Returns on JPMorgan's NEXGEM index of
sovereign dollar debt from frontier economies are just above
flat, on a par with the broader emerging bond index.
Citi's equity sales team said the cracks may deepen.
"The newsflow has been messy, currencies have turned
volatile, valuations are richer than they used to be ... and
with lots of fresh money having hit the asset class over the
past year, a proper pullback looks due about ... now," they