LONDON: JPMorgan is set to launch its longawaited ‘frontier’market local-currency government bond index by the end of September, giving investors a new benchmark for nearly $330bn of debt across some of the world’s fastest-growing e conomies.
Those set to have the biggest weightings include Egypt, Vietnam, Morocco, Kazakhstan, Bangladesh, Pakistan, Nigeria and SriLanka, many of which have enjoyed strong market rallies in recent years after crises.
The World Bank says frontier economies are home to a fifth of the world’s population but account for just 3.1pc of global capital flows and less than 5pc of global GDP.
Their populations, however, are expected to increase by 800 million over the next 25 years,more than the rest of the world combined, meaning they will play an increasingly important role in global economic growth.
Economists also see the new debt indexes helping expand local currency markets, something longchampioned as a way to reduce debt crises caused when currency crashes leave governments unable to pay dollar debt.
It will only includebonds of $250 million equivalent or above. They must also have at least 2.5 years left to maturity, while the maximum ‘weighting’ that any country can have in the index is capped at 8pc.
African countries will account for almost 45pc of the index, while ‘Frontier Asia’, mainly Vietnam, Kazakhstan, Pakistan and Bangladesh, will make up nearly a third.-Reuters