Writing for Barron’s Asia, Ms Juliana Lee, a senior economist for Deutsche Bank, says Asia’s frontier markets of Myanmar, Bangladesh, Cambodia, Laos, Mongolia, Pakistan, Sri Lanka and Vietnam are worthy of attention by investors, delivering relatively better performance, subject to only marginally higher risk.
According to her report dated December 15, the countries have seen strong growth and impressive gains in income in recent years. Indeed, latest projections made by the International Monetary Fund suggest considerable upside going forward for most of these economies.
If the present trend continues, Deutsche Bank thinks that by the end of this decade a majority of these countries could well be represented in Emerging Market bond and equity indices, with a few of them with investment or close-to-investment grade sovereign ratings.
One of the countries profiled is Myanmar, a newly-opened economy which is enjoying low-hanging fruits of first generation reforms.
The report says Myanmar’s potential is substantial but so too are risks to the outlook. Surging capital flows are supporting much needed infrastructure investment, but there is a clear need for further improvement in its institutional capacity to manage those flows.
Among the various forthcoming markers of the economy’s integration to the global economy are attaining socio-political stability, improving governance, and strengthening fiscal, financial, and regulatory institutions.
As the report says, “the transformation of Asia’s frontier economies including Myanmar has been recent but striking. While much more progress is needed before investors can find an array of investment opportunities in these countries, some are already fairly investor and business friendly, and others have begun to realize their rich potential.”
With per capita income steadily moving up from the bottom of the global income spectrum, Mongolia, Vietnam, and Sri Lanka are already in the same income bracket as EM economies like India (US$1,600) and Indonesia (US$3,400), with Bangladesh, Cambodia, Lao, Myanmar, and Pakistan fairly closely behind, the report says.
The bank report points to the sizeable populations in several of these countries, large enough to offer a growing number of middle income consumers now and in the coming years.
Most of the economies, bar that of Pakistan, have been growing at an average of around 5 percent over the last decade. IMF’s broadly optimistic outlook on Myanmar, Cambodia, Laos, Mongolia and Sri Lanka expects growth to hover around 7 percent going forward.