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Updated by Douglas Johnson on Sep 15, 2017
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Frontier Markets | Bourse Performance 2016

We highlight the top-ten performing frontier equity markets in calendar year 2016. All data is on price return basis in US dollar terms through December 30. Note: Local index returns may vary somewhat from the MSCI indices used here because of different constituent lists and exchange-rate issues. Past performance is not an indicator of future results.

Source: http://www.cranganore.com

1

Pakistan | 32.7%

Pakistan | 32.7%

Pakistan has long been shackled by perceptions of high risk. Yet political concerns were sidelined by generous stock-price gains delivered consistently over the course of 2016. Equity investors endorse the benefits of a firehose of Chinese money aimed at infrastructure development. Further market support is provided by a successfully-negotiated IMF facility. Strategic concerns can be isolated. Textiles, are a dominant force, suggesting disproportionate exposure to global trade developments. State enterprises meanwhile cast a lingering pall over the fiscal setting.

2

Morocco | 29.9%

Morocco | 29.9%

Despite impressive gains, the Casablanca Stock Exchange has recovered only some of the ground lost during the 2011-2015 period, when an uncertain European growth trajectory weighed heavy on the market. The market has benefitted from the dividend afforded by a lower oil price, helping to keep macroeconomic stability on track. Expectations of robust growth in the range of 4.5%-to-5.0% have become a magnet for external capital, representing greater focus on newly-industrialized sectors like aeronautics, automobiles, and electronics.

3

Zimbabwe | 28.6%

Zimbabwe | 28.6%

Zimbabwe was stuck in the doldrums during most of 2016. Equity-market investors responded in the fourth quarter to incrementally better fundamentals, although that assessment is relative. The economy faces its most severe downturn since 2009. Buyers were compelled to hunt for bargains by better commodity prices and the ever-closer expectation of political change. President Mugabe, who has run the country since 1980, is now 92 years old. Also boosting stocks was the roll-out of a controversial bond-note program which has helped to ease a national cash-supply crisis.

4

Croatia | 17.6%

Croatia | 17.6%

Croatia was mired in recession between 2008-2014, but the nation is now emerging from that downturn with unexpected vigor. The government estimates that real GDP growth will reach 3.2% in 2017. A key reason is momentum in the tourism sector; hospitality businesses have benefitted from turbulence elsewhere in the Mediterranean. We expect investors will continue to support local stock-price gains over the year ahead, given in part the focus of the newly-formed government on fiscal reform. Yet we acknowledge that political uncertainty is always high in Croatia.

5

Bulgaria | 17.6%

Bulgaria | 17.6%

Gains on the Sofia exchange in part reflect unusual equity-price strength in Moscow. Bulgaria can benefit from an overflow of liquidity, given the deep commercial ties with its neighbor. Yet there are limits to local-investor enthusiasm. The newly-elected president may lean too close to the Kremlin for parliamentarian tastes. And his anti-immigration stance could upend the labor-starved manufacturing sector. While the presidential role is ceremonial, government turmoil will unnerve foreign investors, while the economy may lose momentum from the 3.0% rate achieved in 2016.

6

Ukraine | 14.6%

Ukraine | 14.6%

After bottoming in March, Ukrainian stocks picked up stream throughout the year. The gains reflected relatively better confidence in the political outlook; the Russian military invasion in 2014 sent the market into a tailspin. But the rally dissipated after economists began to make downward growth revisions and fissures surfaced in the banking system. In November, the IMF declined a loan disbursement, pending the delivery of much-needed reform. Their primary concern is corruption. That issue is often cited as the biggest obstacle to foreign investment in the nation.

7

Jamaica | 13.8%

Jamaica | 13.8%

Jamaica was able to extend its stunning gains in 2015 with strong returns in 2016. That strength is a product of a successful IMF reform program that has now given way to high levels of business and consumer confidence. Part of this optimism can be attributed to low oil prices and a buoyant tourism sector, especially as it relates to cruise lines. But the deeper story in Jamaica may be the volume of Chinese money making its way into the economy to fund infrastructure projects, both at the private and public level. One example is the completion of the North-South Highway in 2016.

8

Serbia | 9.7%

Serbia | 9.7%

A common theme among smaller exchanges is the impact of the higher oil price in driving stock-price gains in the final months of the year. Serbia is no different, given the dominant role of Naftna Industrija Srbije (NIS) in the market index. More broadly, growth expectations will stay comparatively buoyant side with the economy on the mend from devastating floods in 2014; real GDP is expected to expand by as much as 3.0% in 2017. One concern among some Western investors is close ties with Moscow and the impact of that relationship on the nation's anticipated EU ascension.

9

Bangladesh | 8.2%

Bangladesh | 8.2%

Bangladesh is now delivering some of the best growth in Asia, with GDP set to expand as much as 7.0% in 2017. One pillar of that growth is a stronger-than-expected textile sector, which has recovered impressively from international pressures tied to labor and safety issues. Another is the fiscal dividend afforded by comparatively low oil prices throughout much of the year. A number of local IPOs in 2016 meanwhile kept investors focused on the medium-term potential offered by the private sector. The key risk factor may now be energy access, rather than state security.

10

Kazahkstan | 6.7%

Kazahkstan | 6.7%

For an economy so heavily dependent on oil, the equities were surprisingly firm throughout 2016. One reason is the sheer volume of direct and indirect sovereign cash at play in the market. Another may be that the economy has held its own, despite petroleum-sector pressures and a currency devaluation. GDP growth was flat in 2016; compare nearby Azerbaijan which will likely tally a GDP decline of 2.5%. A key concern in this market is weakness in the banking system, given that non-performing loans are probably underestimated. Stocks may have to discount lingering risks.

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