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The frontier markets better than Pakistan

The frontier markets better than Pakistan

Despite Pakistan and Argentina being upgraded to emerging market status, Citywire + rated Wojciech Stanislawski believes several frontier countries can offer more attractive opportunities.

Stanislawski, who runs several funds at Comgest including the Comgest Growth Emerging Markets fund, said companies in Sri Lanka and Bangladesh held more promise than those in Pakistan.  

Speaking to Citywire Selector, the Paris-based investor said there were limited opportunities in Pakistan, beyond one of its largest banks, namely Habib Bank.

'The market has gone up very rapidly and people there are not investing in their businesses but they are speculating on the market. The only investment happening there is from the Chinese.

'So, we are looking at Sri Lanka and Bangladesh, as it seems there are better opportunities than in Pakistan. In Sri Lanka there is a conglomerate, insurance companies and a mobile phone company. The conglomerate is almost 7% of the Sri Lankan market and covers many businesses.

‘In Bangladesh, where we are not yet invested, there are gas pipeline companies to look at. These are early days for all of them, as they are considered frontier markets and with good reason,' he said.

While Sri Lanka and Bangladesh have good companies, Stanislawski said that the lack of liquidity and information could be a hurdle. This has prevented his team from investing here so far.

'It is not an easy investment proposition, but it does mean that we are looking at these names and progressively increasing our knowledge about them. Once we feel that the situation is for long term investors to move in then we may eventually end up do something.'

Opportunities in LatAm

Stanislawski also manages the Comgest Growth Latin America fund and has 2.2% of the fund dedicated to Argentina. He said, while there are two or three companies he likes there, he only holds one of them, as it is not a big market.

'We only hold Banco Macro, which is also the only bank we own at Comgest. This bank has a unique customer structure being focused on farming zones in Argentina. It is a very fragmented client base: a lot of individuals and SMEs and not many corporates or large enterprises,’ Stanislawski said.

'For years Argentinians didn't have access to credit markets which makes the sector very over capitalised and they have a very healthy balance sheet and are just at the beginning of the credit expansion cycle.'

Over three years to the end of April 2017 the Comgest Growth Emerging Markets fund returned 13.43% in US dollar terms. This compares to a rise of 6.63% by its Citywire-assigned benchmark, the MSCI EM (Emerging Markets) TR USD.

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