2019 provided a wide range of results for Frontier Markets. While many ended the year with positive results, a handful of markets did not have much to celebrate as the decade came to a close. Here are the 3 worst performing Frontier Markets in 2019 (for comparative purposes, the MSCI Frontier Markets Index posted a gain of 12.2% over the same period).
1st – Lebanon (-19.9%)
Lebanon earned the title of “Worst Performing Frontier Market in 2019” after its flagship BLOM stock index fell by almost 20% in 2019, also placing it as one of the worst performing stock market on a global level. Lebanon featured as the 4th worst performing Frontier Market in 2018 when the stock market fell by 15%.
The BLOM Index was at its lowest in November 2019 when it reached 750 points – almost 25% less than its position at the beginning of the year – when dollar-rationing policies that were introduced by the government began to increase the risk of major shortages in energy, food and other vital supplies.
The Middle Eastern nation experienced multiple events that had put downward pressure on the market. One major incident was the resignation of the prime minister, Saad Hariri, at the end of October in response to protests again the ruling class and corruption in the country. The protests spurred banks to limit customers from withdrawing their money.
The Lebanese Pound has also weakened by almost 30% in the parallel market, prompting Riad Salameh, Lebanon’s Central Bank Governor, to say that “nobody knows” how much the pound could slump on the black market. The Institute of International Finance has also said that the country will need an $8.5 billion bailout package from the International Monetary Fund (IMF) in order to restore growth.
2nd – Bangladesh (-17.3%)
The 17% negative return on the Dhaka Stock Exchange in 2019 had unfortunately placed Bangladesh in second place in the Top 5 Worst Performing Frontier Markets. The market performed poorly against countries in the region including India (+14.7%), Pakistan (+10.7%) and Sri Lanka (+2.3%).
The bourse began the year positively and made a gain of over 10% to 5,950 points in the first few weeks of January, but the momentum was difficult to maintain as the market closed at 4,453 points by the end of December. The 17% drop in 2019 follows a 13.8% decline in 2018.
Some of the main factors behind the bearish trend were aggressive bank borrowing by the government and the depreciation of the Taka against the US Dollar. The government exhausted its net borrowing target for the 2019-20 fiscal years in just a six month period, while revenue collection was lackluster and fell short of expectations.
The DSE did announce, in collaboration with China’s Shenzhen Stock Exchange, the launch of a new index, the CNI-DSE Select Index (CDSET), a composition of 40 large capitlised companies, in a bid to attract foreign investment into the country. There will also be a launch of a new Mid-Cap and Small-Cap Index in order order to provide additional exposure to equities in the country.
3rd – Nigeria (-14.6%)
Completing the Top 3 worst performers in 2019 is Nigeria, which saw its All-Share index accumulate a loss of 14.6%, market a second year of straight losses after it ended 2018 with a loss of 17.8%. The stock market posted negative YTD returns in 11 out of 12 months in 2019 (February being the only positive month with a +0.92% return).
Investors were cautious of investing in Nigeria last year, primarily due to political uncertainty, government policies, volatility in oil prices and the general uncertainties in markets around the world. Last year’s election saw a voter turnout of 34.7%, a figured that stands as the lowest in Africa.
Institutions have also expressed a level of concern regarding the stability of Nigeria’s economy. The Lagos Chamber of Commerce and Industry (LCCI) has said that rising inflation, a fall in private investment inflow and various other marcoeconomic challenges have shown that the country is yet to recover as no growth has been experienced across sectors, as well as the over-reliance on its oil sector increasing its exposure to volatility in the global crude oil market. The World Bank and the International Monetary Fund (IMF) are forecasting sluggish growth for the country in 2020 at 2.1% and 2.5% respectively, primarily due to uncertainties in the political landscape.