e-fundresearch.com: What are your personal lessons learned from 2014 frontier markets developments?
The biggest lesson from UAE and Qatar was that when non-fundamental events like these upgrades happen, markets can trade at extreme valuations for a protracted period of time. Many of the stocks in UAE and Qatar were trading at least as expensively as any stocks in the world during the upgrade process and the passive inflows into these markets continues well after the actual date of moving between indices.
Regarding the oil price move, there were many instances where markets traded very irrationally without recourse to what was actually going on. A good example of this is Vietnam. Vietnam is an oil producing country BUT has no refining capacity so has to re-import all of its petroleum products. However the market overlooked this fact and the Index fell by 20% on the back of the fall in crude prices. Once we analyzed that the actual effect on the economy was neutral we were able to take advantage of this miss-pricing by adding to our Vietnam exposure.
