By MATTHEW CRAFT
NEW YORK (AP) â¿¿ Bulgaria, the United Arab Emirates and Pakistan. An itinerary for a traveler with a flair for languages or a list of scenes for a spy thriller set during the Cold War?
Neither. It turns out they are among the countries with the best-performing stock markets in the world this year. And the success of these so-called frontier markets, mainly in Asia and Africa, has attracted U.S. investors eager to find the next set of rapidly growing countries now that Brazil and other emerging markets have fallen into a slump.
"These places might scare some people," says Russ Koesterich, global chief investment strategist at the money-management giant BlackRock. "But they're seeing some of the fastest growth in the world."
People had a similar response when investors were dabbling in emerging markets during the 1990s, Koesterich says. "Brazil and India â¿¿ those used to be scary places, too."
Unlike the U.S. and Europe or even emerging markets like China and Brazil, frontier-market countries are a grab-bag group with little connection to each other. But they have a few things in common. They're small, growing quickly and some, like Kuwait and Qatar, are rich. Many of them shunned the outside world for years and are slowly opening their doors to outside investments.
Thanks to rapid economic growth, the MSCI Frontier Market index has gained 22 percent over the past 12 months. That compares with a 3 percent rise for MSCI's emerging market index, and 25 percent for the Standard & Poor's 500, the benchmark U.S. stock index.
Investing in frontier markets carries plenty of dangers. Argentina's government could decide to take over more private companies and leave investors with nothing. The war in Syria could spill into Lebanon and Jordan, upending their thriving markets. Cote d'Ivoire, Pakistan and many of the 37 frontier countries have had coups, wars and other turmoil over the past two decades.