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Investors 'may look towards frontier markets'

options instead of using a bank

The debt crisis in the eurozone is continuing to impact on both consumer and business confidence across Europe and other parts of the world.

While confirmation that up to €100 billion is being used to shore up some of Spain's banks has been welcomed by the markets, the situation is still far from being resolved.

And countries that are not part of the eurozone are claiming they are being directly affected by the ongoing financial turmoil. Indeed, the UK's Chancellor of the Exchequer George Osborne told the Sunday Telegraph at the weekend that Britain's economic recovery is being "killed off by the crisis on our doorstep".

So if investors are looking to transfer money online to secure assets in another country, where can they hope to find a reasonably secure option that enables them to get good returns?

Frontier markets could be one possibility, as Schroders believes these offer a number of advantages.

For instance, the organisation said they are currently at an early stage of development, which means they look set to enjoy higher growth rates than both established and emerging economies.

Schroders suggested that the fundamentals in the developed world are currently quite "poor", which means investing in frontier countries is actually a "less risky" course of action.

"Frontier markets offer attractive investment opportunities, undeveloped relative to their economies and offer potential significant diversification benefits and attractive valuations," it commented.

Schroders noted that the case for investing in these locations is becoming "increasingly attractive", particularly as frontier markets are "supported by strong secular growth drivers".

The group said a frontier economy could be defined as a nation with a low or middle income that has a less developed capital market than other global emerging markets.

This, it stated, means countries in locations as diverse as the Middle East, Latin America, Africa, eastern Europe and Africa could qualify and be ripe for investment "today and also over the longer term".

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