A combination of improving investor sentiment and a pick-up in global commodity prices has underpinned a recovery in frontier financial markets in recent weeks. Since reaching a two-year low in early January, the MSCI Frontier Markets Index has risen by more than 8% (in local currency terms). Over the same period, 21 of the 31 equity markets that we cover have risen. The best performers have been concentrated in commodity-exporters, notably Kazakhstan and Saudi Arabia.
Frontier market currencies have also performed fairly well. The Argentine peso has led the way following the news that the government has agreed a provisional deal with holdout creditors from the 2001/2 sovereign default. The one major exception is Venezuela, where the bolivar’s primary rate was devalued by 37% in an effort to ease the pressure on the public finances.
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