Vecht, the manager of the BlackRock Frontiers investment trust, pointed out that Nigeria was one of his team’s most favoured countries at the start of 2012, although it is beginning to look “less attractive”.
Nigeria was the trust’s largest country allocation at the end of the third quarter, accounting for 15.9% of the portfolio. Holdings from the country found in the fund’s top-ten positions include First Bank of Nigeria and Zenith Bank.
Speaking at an Association of Investment Companies event, Vecht said: “Although we remain excited by the immense long-term potential of Nigeria, which we expect to benefit from its favourable demographic profile, valuations look less attractive after a 50% rally year to date.”
The manager argued that he considers now to be “the right time” to look at certain Asian frontier markets.
“Countries like Bangladesh and Vietnam have all of the long-term growth drivers, but they are also becoming much more competitive on a global scale, as the costs of production surge elsewhere in Asia,” he said.
He gave the example of Vietnam as demonstrating this point. The minimum wage in Hanoi is $95 a month, compared with the $137 a month seen in Jiangxi, China’s cheapest province for manufacturing.
In the BlackRock Frontiers investment trust’s latest factsheet, Vecht said he added to positions in Vietnam “at attractive valuations” during September. This move was made on the belief that the market overreacted to recent events in the country, such as its overleveraged state enterprises and concerns over its banking system.
Vecht’s portfolio had 5.5% allocated to Vietnam at the end of the third quarter, while 3.4% was in Bangladesh.
