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Winners and losers from fall in oil price

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Frontier markets - May 2015

“Despite the lower commodity prices and the current outlook, the International Monetary Fund’s latest figures for Africa excluding South Africa still show GDP growth accelerating 6.1 per cent in real terms by 2017,” Mr Clark says.

“In spite of not having a bullish commodity outlook, [there is] still strong growth expected. Why is this the case? I think it’s a blend of various things, but a lot of what’s happening on the continent is improved infrastructure, better business and political environments and all of those things are making it easier for other businesses to grow and therefore [boost] the economies.”

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Geopolitical risk is heightened among frontier market nations and is one of the risks investors should be aware of before adding this region to their portfolio.

Mr Vecht cautions: “They face geopolitical risks to a greater extent, not least because the institutions in those countries are less developed than we are blessed with here in the UK.

“I’d be a little more cautious about much of sub-Saharan Africa at present. I think Nigeria has gone through a very impressive transition between parties, but that doesn’t remove the underlying issue that the currency [the naira] looks overvalued and clearly there needs to be some movement on the currency.”

Mona Shah, portfolio manager on the Rathbone multi-asset portfolios, agrees that in frontier markets investors need to have their “eyes wide open” beyond geopolitical issues.

She remarks: “There is a greater risk of currency crises in the current environment, where many of these countries have taken on more debt that’s dollar denominated but obviously their revenues are in their local currency.”

Ellie Duncan is deputy features editor at Investment Adviser