Frontier markets in Asia such as Sri Lanka and Bangladesh will benefit from low oil prices, making their equity markets an appealing investment bet.
Michael Levy, manager of the Baring Frontier Markets Fund, has recently invested in stocks such as Brac Bank, in Bangladesh, in the hope of capitalising on low energy costs.
He writes that "many frontier market countries are net oil importers, positioned to benefit from the oil price fall".
"Everything else being equal," he adds, "the combination of a supportive economic environment and lower energy costs should be positive."
Equity investors deem Asian frontier markets to be attractive because their economies are growing quickly and equities are relatively cheap. Stocks in the MSCI Frontier Market index are trading, on average, at 9.3 times earnings, compared with 11.5 times for stocks in the MSCI Emerging Market index.
"Even if you allow for the potential for higher volatility and the additional risk factors from the asset class, we believe that frontier markets warrant closer investigation," says Levy.
©2015 funds global Asia