ETFs for Investing in Frontier Markets

NEW YORK (TheStreet) -- There's lots of talk about asset bubbles and oversaturation in emerging markets like Brazil, India and China, so investors looking to diversify their portfolios may want to investigate frontier markets instead.

According to the International Monetary Fund, 17 of the 20 fastest expanding economies fall into the frontier market category, which refers to developing markets at a much earlier stage of economic and financial development than emerging markets.

Examples include Qatar, Uzbekistan, Pakistan, Vietnam, Argentina, Chile, Ghana and Angola.

These markets are attractive partly because their lack of access to Western financial markets shielded them from the global credit crisis.

They also are developing rapidly, which generally translates into higher earnings potential for domestic companies and investors.

Frontier markets also offer investors the opportunity to diversify their portfolios, because these markets have growth dynamics that often do not correlate with the economies of developing nations.

Additionally, growth in China and India is likely to trickle down and have a domino effect in some these frontier nations. This trend is already starting to emerge as many of these countries are witnessing an expansion of their middle class, which is increasing spending power and consumer consumption.

Lastly, some observers suggest that some of these markets are undervalued because they are rich in natural resources and commodities while enjoying low labor costs. In fact, Ghana is the world's second largest cocoa producer, Angola is the largest crude oil producer in Africa, Qatar has an ample supply of crude oil and natural gas and Chile is known for its copper production.

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