Tuesday, April 22, 2014

Marc Faber: Frontier Markets vs. Emerging Markets

ETF.com: Over the past year, frontier markets have done extremely well compared to emerging markets. What are your thoughts on frontier markets?

Marc Faber: I have to go back some time, because the expression "frontier markets" did not exist in the '80s or '90s. It's a more recent expression for markets and economies that haven't opened up yet and are more recently opening up and joining the global economy. So, what you would have called emerging markets are now called frontier markets. Some of them have colossal booms, and then also colossal declines.
Now, is Vietnam a frontier market or an emerging market? In my book, it's basically an emerging market. But it's ranked as a frontier market. And Mongolia is also a frontier market, as are most African markets.
Some of them have had good performance, because the zero percent interest-rate policy of the U.S. means that capital flows somewhere in some kind of assets. Frontier markets are relatively risky assets. Five years ago, all the German dentists were investing in Vietnam, and then it collapsed. More recently, they all wanted to buy Myanmar assets.
But investors must understand, yes, long term, they will grow, but there is an execution risk. I'm the chairman of a fund in Cambodia, and I'm not managing the fund, I'm just the chairman of the board, so I look after investors' interests, but the manager so far has really failed to perform particularly well, given the strong growth rate Cambodia has, for the simple reason that they invested money in numerous assets that didn't work out.
So this is not such a simple game. We always have to consider, optically China had macroeconomically the best growth anyone could imagine for the last 15 years. But I wonder who has made money in Chinese stocks. Not many people.

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.

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