Lately, there has been quite a bit of online chatter about the imminent arrival of new investment products designed to allow individual investors to invest in so-called "frontier markets" - places like Africa and the Middle East where volatility, lack of liquidity and geopolitical risk are everyday concerns. As the recent shakeup of classifications at index provider MSCI suggests, however, investors should be careful to understand the underlying holdings of these new products. Investors may think they are investing in "frontier" markets like the "Middle East" and they may actually be investing in emerging markets like "Argentina."

As first reported in the Wall Street Journal, MSCI is moving forward with new classifications, including a plan to "graduate" South Korea and Israel from "emerging markets" to "developed markets." At the same time, MSCI is considering whether Argentina and Colombia should be downgraded from "emerging" to "frontier" markets. Already, Jordan is set to drop out of the "emerging" category and into the "frontier" category later this year. At the same time, the Persian Gulf nations of Kuwait, Qatar and UAE could be upgraded to "emerging" status relatively soon.

The moves could have a big impact on money flows into and out of different countries: "With more than $3 trillion benchmarked to MSCI's international indexes, the moves could eventually have wide-ranging ramifications for mutual funds and investors, sending flows of money into some countries and out of others."

For members of the TradeKing Community: What do you think should be the primary criteria for determining "emerging" or "frontier" market status?

NOTE: Please keep in mind that TradeKing does not specifically endorse any of the securities or trading strategies mentioned. Depending on your risk-reward profile, this trade may or may not be suitable for your portfolio. The stocks mentioned are for educational purposes only.

[image: Frontier Day by beenit on Flickr] 

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