Simply outlandish

Canadian investors increasingly have been engaged in a simply outlandish tactic: placing significant funds in what now are called frontier markets.

The usual markets, of course, are obviously the Canadian, American, European, Asian and markets in undeveloped lands.

In search of investment opportunities, speculators have gravitated to placing funds in frontier markets, including such places as South Vietnam, South Sudan, Kenya, the Congo and similar, unusual places.

No longer content to invest in the tried and tested lands – North America, Japan and Europe – they opt for the Chinese market via the Shanghai Stock Exchange, and then consider frontier markets.

Placing funds in these frontier markets must be viewed as super-gambles, like none other in the globe.

Why would any sensible person invest in the world’s newest nation, South Sudan?

It has not been able to establish any government, not even a nominal one in the new territory. It is located south of the Sudan, itself a relatively new nation, and is south of Egypt which itself is the midst of political turmoil, with the army overthrowing the duly elected government.

Then there is Somalia, the home for pirates that hijack ships and kidnap passengers for ransom. Many Asian nations lack any stable regime, even a large country like Indonesia. Quasi-dictatorships are the rule in many Asian nations.

Investors have invested recently in South Vietnam, which is in the shadow of North Vietnam and Communist China.

What recourse would a Canadian have if defrauded, assuming that the individuals were not captive somewhere? In mines in Africa owners and workers also have been held for long periods of time.

There are potentially rewarding places that are unique, like mines in central Africa, and have properties that have great potential.

Still, it is amazing that many Canadians are willing to be exposed to great risk.

Perhaps some areas are becoming more suitable, such as Libya, where a dictator has been replaced and oil reserves are extensive.

Generally, do the potential rewards outweigh the risk? Clearly, there are numerous opportunities elsewhere that should be considered before placing funds in frontier markets.

 

 

Bruce Whitestone

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