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Investors eye emerging and frontier markets

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African countries like Tanzania are expected to attract increased investment as foreign investors diversify their portfolios into emerging and frontier markets. WhyAfrica will visit Tanzania in 2023 as part of its annual WhyAfrica Road Trip. Image credit: Leon Louw for WhyAfrica

Investors eye emerging and frontier markets

African countries should benefit as foreign investors show an increased interest in emerging and frontier markets.

New research from Dragon Capital reveals that one in three (34%) retail investors plan to invest in emerging markets in the next 12 months as they increasingly diversify their holdings.

Of these, 7% will be first-time investors, 21% will slightly increase their allocation and 6% will dramatically increase their allocation to emerging markets. Just 3% questioned plan to reduce their exposure.

The study, carried out amongst retail investors in the UK, shows 32% of UK retail investors think that growth in emerging and frontier markets will outpace that of developed markets in the next five years.

The top three attractions given by UK investors for investing in emerging and frontier markets are that many have huge benefits to gain from the technological revolution (51%), followed by an acknowledgment of growing stability in these markets (48%), and the belief that many are currently undervalued (44%).

At the moment, one in five (19%) UK investors are currently invested in a fund with exposure to emerging and frontier markets. Of those, the biggest number (39%) found the fund themselves and self-invested, followed by 37% who had the fund recommended to them by their financial or professional adviser or wealth manager.

Strong track record essential (Investors eye emerging and frontier markets)

Dragon Capital’s research shows the most important factor for UK investors when choosing an emerging or frontier market fund was clear and low-cost fees, followed by a strong track record.

Liquidity ranked as the third most important factor followed by a strong focus on corporate governance and ESG and longevity.

According to Dien Vu, Portfolio Manager at  Dragon Capital’s investment trust Vietnam Enterprise Investments Limited (VEIL) investors have been dramatically increasing their exposure to emerging market equities as falling global inflation and the reopening of China’s economy has helped to reverse the slide in this asset class last year.

“Vietnam is leading from the front, as the only Asian economy to receive a significant upward revision from the IMF, with revised growth forecasts up to 6.7%. This comes after the Vietnamese economy rebounded by an impressive 8% in 2022, the highest in 10 years. UK investors can clearly see many benefits within emerging and frontier markets and it’s encouraging that so many are acting on this to capitalise on future growth potential.”

Dragon Capital commissioned the market research company Viewsbank to survey 1,082 adults in the UK, representing the demographic profile of the country. 492 of those surveyed had stock market related investments. The survey was conducted online between February 17th and 20th 2023.

Investors eye emerging and frontier markets

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Investors eye emerging and frontier markets

 

 

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