Investing in Frontier Markets

Of the 26 countries I’ve visited, one memory in particular stands out in my mind.

I was in China. Not in Shanghai or Beijing, mind you, but far out west in a rural area where I was called “foreigner” as if it were my name.

One day, at the junction of two dirt roads, I saw the usual activity you found all over the Middle Kingdom during the first decade of the twenty-first century. Saws whizzed and hammers banged as laborers walked around a work site on bamboo scaffolding.

But these guys weren’t putting up fancy skyscrapers or even repairing an old house.

They were building the town’s first street corner – just a couple of two-story buildings – and I was witnessing the beginning of a city.

Strangely, the scene was somehow familiar…

My mind immediately flashed to countless western movies I grew up watching. I’m sure you’ve seen them, too.

But this wasn’t “Tombstone” and this wasn’t the Old West. This was a different type of frontier.

I Went Down to the Crossroads…

I know about junctions. My hometown of Kansas City gained importance because it sits where the Kansas and Missouri rivers meet. This new street corner I saw in China was also at a crossroads, and the locals knew that meant a promising future…

As long as they seized the opportunity, that is.

Are you ready to tap into frontier markets? Like the scene I saw, dozens of economies around the world find themselves where two roads meet – it’s the junction of the road to prosperity and the road to stability.

The road to prosperity is paved by entrepreneurs and visionary leaders. They’re folks who have ambition, but aren’t so selfish that they’ll hurt their country’s cause to preserve their own power.

To get on the road to stability, you need leaders with the maturity to lose an election and keep working hard to build the future. You also need the confidence of citizens to not riot in the streets every time bread prices change.

The Guggenheim Frontier Markets ETF (NYSE: FRN) does a nice job of picking countries and companies that allow you to benefit from those key trends.

In the fund we find:

• Kazakhstan – represented by KazMunaiGas, the national natural gas company, and Halyk, a commercial savings bank. Right there we have plays on the central Asian country’s rich resources and its improving business climate.

• Chile – FRN holds shares of Banco Santander Chile (NYSE: SAN), and for an interesting twist, the fund also threw in Vina Concha y Toro (NYSE: VCO), a quiet wine industry giant whose headquarters I’ve visited… after taking a bus through some of the capital city’s seediest suburbs. Chile’s ecological diversity and copper production make it a tourist and business magnet, and key driver of future Latin American growth.

• Colombia – This country used to be synonymous with drugs and violence, but now two of its top companies trade on the New York Stock Exchange. National oil company Ecopetrol (NYSE: EC) and bank Bancolombia (NYSE: CIB) make this nation in transition FRN’s heaviest investment. Colombia totals around 15% of the ETF’s total value.

• Egypt – Well, if you’ve been watching the news, you know Egypt is still dizzy from the wild Arab Spring of 2011. Nevertheless, this country is one of the most promising in the bunch. In fact, part of the reason for Egypt’s turmoil has been its large, young workforce, eager to make an impact and transform the nation. FRN profits from the young, online, energized next generation of Egyptians with investments in Orascom Telecom.

Orascom isn’t just a market force in the Arab world… The company has holdings in Bangladesh, Pakistan, Algeria and Zimbabwe.

Are those far enough off the beaten path for you?

To be frank, there are some countries on this list that I haven’t even thought of visiting! Good news is, I don’t have to go there to get in on the action, and neither do you.

The Frontier Markets ETF gives you a way to plant yourself at the crossroads in these places and reap the rewards of getting there before the crowd.

You may not hammer a nail into the first couple of buildings in town, but with FRN in your portfolio, you can be a pioneer in your own right.

Good Investing,

Sam Hopkins

Article by Investment U