Aberdeen’s Young: Why I am avoiding frontier markets
Hugh Young is steering clear of opportunities in frontier markets over fears of a repeat of the collapse seen in Vietnam in 2009.
Young (pictured), who is managing director of Aberdeen Asset Management’s Asia division and oversees £24bn in AUM, has not jumped on the frontier markets bandwagon because he sees them as too risky.
“Frontier markets are a popular marketing story, but the region can also be dangerous. Vietnam is a good example, everyone got excited, but the companies were dreadful. A lot of money poured in and now the market has collapsed,” he said.
The Ho Chi Minh City Stock Exchange’s VN index peaked in February 2007 at 1,137, then bottomed out in February 2009 at 241. It is currently trading at around 454.
What happened in Vietnam has deterred Young from investing in other popular frontier markets, which are currently attracting investor attention.
“People are getting very excited about Burma, for example, despite the lack of access to it. There is one company – Yoma Engineering and Trading – the share price of which has increased fivefold. We were tempted, but we tend to buy the reality rather than what people promise. We prefer to wait to see if they do what they are saying.”
The only frontier market in which the manager invests is Sri Lanka, where he holds blue-chip Aitken Spence, DFCC Bank, the National Development Bank, and online supermarket Keells.