Sri Lanka most attractive frontier market: Citi Research

Sri Lanka was ranked the most attractive frontier market, according to the rating model developed by Citi Research.
The model is aimed at providing the investors a macro view of prospects for 12 leading frontier markets. It is based on six key metrics: earnings momentum, price momentum, valuation, macro growth and imbalances and monetary policy.
In an interview with WSJ, Citi Research Frontier Markets Strategist Andrew Howell had said, “We thought Sri Lanka was cheap, but it turns out its really cheap.”

“It’s a market you probably want to look at closely,” Howell emphasized.
The model illustrated that Sri Lanka, Romania and Kenya were the most attractive frontier markets.
Meanwhile, Exotix’s Global Head of Research, Paul Domjan, had pointed out that frontier markets are in a prime position to pioneer the use of blockchain technologies and to lead in the use and development of cryptocurrencies.

“We may be at the beginning of another episode of technology leapfrogging, as frontier economies move straight to blockchain-distributed ledgers and cryptocurrencies as alternatives to weak domestic institutions and capital controls,” Domjan said.
Domjan argued that blockchains, which underlie cryptocurrencies such as Bitcoin and Ether, could be invaluable in recording contracts, enabling transactions and establishing ownership in countries where institutions are weak. The cryptocurrencies themselves are already proving popular in countries such as Zimbabwe and Venezuela, where faith in the conventional currency is low.

Exotix made its prediction in a report on the key themes that could provide new opportunities for investors in frontier markets. Among the other themes it identified were China’s changing engagement with frontier markets – from a predominantly extractive relationship to one based more on partnership – and the impact of mobile money; particularly the evolution of e-commerce businesses built around mobile money services.

Another key theme developing in frontier markets investing is increased transparency, according to Citi Research Strategist Howell. Recent improvements in published data and analyst coverage have made it possible to measure earnings and share-price momentum, which are key elements in an accurate valuation model, he said.

“We may be at the beginning of another episode of technology leapfrogging, as frontier economies move straight to blockchain-distributed ledgers and cryptocurrencies as alternatives to weak domestic institutions and capital controls,” Domjan said.
Domjan argued that blockchains, which underlie cryptocurrencies such as Bitcoin and Ether, could be invaluable in recording contracts, enabling transactions and establishing ownership in countries where institutions are weak. The cryptocurrencies themselves are already proving popular in countries such as Zimbabwe and Venezuela, where faith in the conventional currency is low.

Exotix made its prediction in a report on the key themes that could provide new opportunities for investors in frontier markets. Among the other themes it identified were China’s changing engagement with frontier markets – from a predominantly extractive relationship to one based more on partnership – and the impact of mobile money; particularly the evolution of e-commerce businesses built around mobile money services.

Another key theme developing in frontier markets investing is increased transparency, according to Citi Research Strategist Howell. Recent improvements in published data and analyst coverage have made it possible to measure earnings and share-price momentum, which are key elements in an accurate valuation model, he said.