Lead — The current discourse surrounding frontier markets highlights a cautious optimism as emerging economies navigate post-pandemic recovery. Per the full note from J.P. Morgan, the sentiment expressed at the 2025 Emerging and Frontier Markets Opportunities Conference reflects a growing interest in specific frontier nations amid varied economic conditions. This optimism must be contextualized against the backdrop of fluctuating global rates and persistent inflationary pressures. The view here aligns with a focus on sustainability and reform as key drivers for investment returns in these markets.
What the desk is arguing
The desk acknowledges a nuanced recovery phase in frontier markets, fueled by targeted structural reforms and foreign investments. As highlighted by the J.P. Morgan research team, attendees of the recent conference shared insights regarding the path forward for these nations shaped by external economic shifts.
The commentary points to several countries’ efforts to stabilize their fiscal positions post-COVID-19, particularly emphasizing public investments in infrastructure and healthcare. This approach aligns with the notion that specific governance improvements can substantially enhance credit conditions, presenting a favorable environment for fixed-income investors.
Where it sits in our coverage
Currently, the consensus target for frontier markets shows a projected return opportunity aligned with our internal analysis of key economic indicators. In light of rigorous assessments, here are notable targets for comparison: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk’s view sits near the upper bound of the consensus spread, suggesting a slightly more optimistic outlook compared to bofa, which remains bearish on specific frontier currencies.
How other firms see it
Some firms, like jpmorgan, advocate for investment in targeted frontier markets, supporting the overall thesis with cautious optimism regarding infrastructural growth. Meanwhile, bofa maintains a more cautionary stance, focusing on potential downside risks tied to debt sustainability and inflation pressures.
Potential currency pairs to monitor include CAD/USD, which often reacts to broader emerging market trends underpinned by commodity prices, and other regional pairs that may reflect changing investor sentiment towards frontier economies, reinforcing the overall outlook issued.
01Growing interest in frontier markets driven by structural reforms.
02Cautious optimism reflects attendees' insights from the J.P. Morgan conference.
03Investment in infrastructure is vital for recovery and credit conditions.
04Internal targets indicate a divergence in bullish and bearish sentiments across firms.
Market implications
Investors should closely monitor the performance of selected frontier currencies, particularly as they respond to shifts in global risk sentiment. A key level to watch will be 1.075, representing a critical threshold for investor confidence in upcoming monetary adjustments.
Risks to this view
The primary risk to this bullish outlook centers around potential geopolitical instability or unanticipated shifts in global monetary policy that might ignite volatility in these emerging markets. Additionally, underperformance in fiscal reforms could lead to diminished investor confidence and trigger a reevaluation of positions.
Hello, and welcome to our At Any Rate Emerging Markets Focus podcast, a place for us to discuss recent developments and key issues of focus in emerging market fixed income asset class. I'm Ayode Majabi, Frontier Market Strategist here at JPMorgan, and I'm joined by three colleagues for a special edition of this podcast to discuss takeaways a week after our Emerging and Frontier Markets Opportunities Conference in London, where we covered many themes and met various government officials. Today's podcast will focus on frontier market, part of the conference, and for that, we have Nikolai Alexandru, Head of EDGE, also known as Frontier Economics at JPMorgan, Katie Mani, Senior Economist, also focused on EDGE countries, and Bolao Ntaiwo, Head of Africa Economics, all of whom can help unpick the state of play and feedback around these parts of the market.
Niko, Katie, Bolao, thanks for joining. Happy to be here, Ayode, and welcome everyone. Thank you for having me, Ayode.
Thanks for having us, Ayode. I'm looking forward to the discussion. Great.
I mean, we are sitting here a week after the London EM Conference, which was well attended with over 1,000 participants and twice as many sovereign issuers as we had last year. Clearly, there's a lot of interest in emerging markets more broadly, but frontier markets specifically. I'm curious to hear what you all thought about some of the themes that stuck with me were, one, investors' continuous cautious optimism that the U.S. would be able to avoid recession over coming months.
Investors also acknowledged that spreads are quite tight, but they could remain tight for some time. And as a result, frontier markets are likely to remain trendy as more and more managers look for true bottom-up investment stories. I'm keen to get the discussion started, so perhaps we could start with you, Niko.
Let's start with the overall EM frontier market environment. Many frontier economics have performed well this year. What was your impression from the conference?
Do you think investors are still looking to be fully invested in these countries, or was the impression that investors are a bit more cautious and will be more selective going forward? Yeah, sure. I mean, basically, the most striking aspect to me during the conversations I had along the sidelines of the conference, but also in various other meetings, was the optimism.
I mean, people are generally optimistic about emerging markets, and particularly about frontier names. And frontier names, I mean, we have portrayed in EMH throughout this year a positive story about these countries, right? But there was usually quite a bit of pushback, particularly in some periods.
But it wasn't the case now. I mean, it kind of felt very little pushback from investors. What else I've noticed is – and this goes along the lines that you kind of mentioned with tight credit spreads – I noticed more interest in local markets than credits.
And that's mainly because spreads are tight and people see less opportunities there. In local markets, and I'm sure we're going to talk about it later, right, I had quite a few conversations. I've seen good interest in places like Nigeria, Egypt, Kazakhstan.
So while Nigeria and Egypt are kind of more regular, so to say, with investors in local markets already having significant presence, Kazakhstan is, to me at least, a newcomer, but definitely there. And then in the last time space, there was interest, including in the high-yield session that we've done in local markets in DR and – so both Dominican Republic and Costa Rica. Briefly on the credit side, and I'm going to finish here, the views were mostly in the direction of being short the market because of this tightness, but then being long in specific stories on the credit side, right?
So this kind of selection – I've seen this sort of a selection also in, let's say, local markets, I mean, where people want to be long, but they wouldn't be long anything, right? They want to understand where stories are better, where fundamentals are better, and therefore it's better to be long in those places. And that's all from me for now.
Thanks. Thanks, Nikolai. I'll echo that as well.
I felt investors were willing to be long, but quite selective in their choices as well. Okay. Katie, coming to you, let's turn to some of these markets specifically.
You hosted a sovereign ratings panel. So first, what were your impressions from that session with regards to overall health and outlook for frontier or edge economies? And then second, how did you – how were your views compared to this one from conference?
Hi. Hi, Io. Thanks for having me.
Yeah, so in frontier, economies are moving in the right direction when it comes to growth, lowering inflation, enacting monetary and FX reforms, and improving their fiscal accounts. So the tone was positive overall. I think, you know, particularly when you have in the background, again, uncertainty on the trade front and uncertainty on global growth.
But by their nature, frontiers are quite diverse. So exposures to FX, to Fed cycles, commodity price movements, and global growth trends are not uniform. And I think, again, that's something that makes frontiers interesting to investors in this climate, where, again, they're just – the typical correlations just don't apply here.
So a little bit more work needs to be done, but, you know, you can get some of that differentiation. So again, a lot of that hard work that I just mentioned has been done particularly in the mid-tier frontier credit space. So we call those the BBs.
So here we could talk about Morocco, Paraguay, Serbia, Uzbekistan, also Oman and Azerbaijan that were recently upgraded to IG, who are all making reforms. The rating agencies also have several of these on the radar to make investment great. But it seems that they, you know, they need more of a stronger track record.
So, you know, it's not just, again, delivering, again, positive metrics in this environment, but also being able to kind of, again, hold things together if and when there is a downturn. I also thought that the tone was more upbeat among many of the African names, as Nikolai said. So again, Nigeria and Egypt obviously stand out.
We had client questions about Ghana given high real rates and also, again, just the racing upwards of gold prices. Kenya was another one where it does look like there could be space for improvement on the rating side. But again, I think rating agencies generally recognize these improvements.
But again, they still point out sort of fundamental drives on the credits. So, for example, you know, low revenue generation for many of the SSA countries, a high interest to revenue burden in the case of Egypt, given so much of it is, again, short term and domestically issued. And so, again, I think that, again, I think, you know, there's sort of there was there's bullishness in terms of on the market side of things.
But maybe the rating agencies, again, having to take a slightly more, again, longer term view, again, want to see a little bit more of a track record before turning so much more positive. Thanks, Katie. So both Nikolai and Katie have highlighted Africa as, you know, potential bright spots.
Now, I remember seeing you dashing from meeting to meeting. You seemed like a very busy man during the conference. What were your impressions?
Were there any themes that emerged from your interactions with this sovereigns as well as the investor views? Thanks, indeed. I mean, I think we had we had about five African sovereigns, three of them, which, you know, were new.
We hadn't had them before and in total about six agenda sessions. I think one interesting thing is that all of those meetings, even for the newcomers at the conference, were packed. I don't remember any meeting room that wasn't active, whether for the agenda session or for one on one sessions.
And I think that just goes to show the interest from client overall in Africa, in Africa sovereigns. And I think a lot of that stems from some of the things that were already highlighted by Nikolai and Katie in that we've seen very significantly improved fundamentals from a lot of these countries. Reforms have largely been on track and are there and they are progressing.
And I think one key thing, again, I noticed particularly from the policymakers is that, you know, it didn't seem to me like, you know, they were going to be relenting on their efforts just yet. You know, again, in this region, what you tend to get concerned about the most is what we call reform fatigue. But it seems like, you know, the sort of global shocks that we've seen over the past few years has now started to allow the authorities and policymakers in this region, you know, think more differently, you know, act more differently and ensure that the reform path is more enduring.
And at least that would eventually bring, you know, meaningful, meaningful success over the long run. You talked about themes. I think clearly the investors want a difference, right?
We had spoken earlier about tight spreads. I think given how well the African sovereigns have performed, like over the last year or so, there's clearly, you know, demand for new issuances. So, you know, clients were asking, you know, Nigeria when they were going to come to market or Gola when they were going to come to market, for instance.
And it seems like that demand was there for there to be new paper for these sovereigns. And again, that goes to show, you know, how significant the improvement that we've seen in these countries have been over the last few years, despite, you know, the global shocks and the shifts that we've seen. OK, let's stick with you for a moment and discuss some countries.
Two questions for you. Which countries surprised you the most and why? And also, which country were investors most excited about and why as well?
So, I mean, I think I'll make those two questions because some of the some of the countries that investors were excited about are perhaps, again, some of the some of the countries that I think, you know, delivered or I was I was surprised, quote unquote, with as well in terms of in terms of what is going on there. You know, I talked earlier about the reform momentum across most of these countries. You know, Nigeria is always of interest.
So there was there was no surprise there. But if I were to pick two countries of the lot, I would say Uganda and Angola and pass for separate reasons. You know, Uganda, I think they have a very strong reform story that that is that is coming.
You know, you're thinking about how there are now foreign direct investments coming through into the oil and gas to the oil space. Particularly the expectation is that from the second half of next year, they would start exporting oil and that should start to meaningfully correct. You know, the current accounts, the last kind of deficit that they currently have.
Also, on the other side of it is that there should be a refinery coming up as well, which also would help to reduce on the import side, the import of petroleum product. On top of that is the expectation that that should also start to meaningfully improve the fiscal trajectory. Right.
So fiscal credit account deficit narrows, fiscal deficit narrows, government issues narrows, and then you can then start to bring these IRA rates lower. And clearly it was it was it was of interest to investors because one of the things investors wanted to understand is because, you know, the real rates, you know, are somewhere sitting at about five percent at the moment. They're thinking, when would that start to narrow?
And I think and I think and I think it was just there was clear and concise communication from authorities there, which which I think was very interesting. And definitely the investors, investors were interested. Angola for for maybe slightly different reasons, you know, Angola is one, you know, that I've struggled that I've sort of struggled over the last few years in terms of, you know, delivering on on the reform path, on the reform trajectory.
But one thing is because they are so heavily dependent on oil, they've had to recalibrate a lot of fiscal. And it doesn't seem like, you know, they are losing the track on that. And I think that, again, was was a clear, decisive communication from from authorities there in terms of, you know, reducing the debt to China, breaking the debt down, recalibrating the fiscal.
If it goes before prices go below a certain a certain a certain benchmark. And I think that was, again, clear to investors. And I think investors now, you know, better understood the story and what was going on there.
And they also talked about sort of different levers that they can pull and the buffers that they have in the event that, you know, we see another sort of shifting global. So I think those two countries in particular, in my mind, are probably probably want to watch over the coming over the coming months and years. Thanks for that.
Nico, basically same question for you. Which country did investors engage you the most about and why? And partly for selfish reasons, I found the engagement with Kazakhstan very interesting.
What did you think? No, definitely interesting Kazakhstan. But before I go there, let me say a few words about some names in Africa.
I don't want to repeat too much on what Bolohan said, but clearly Nigeria was a topic of discussion in several discussions that I had. What surprised me on Nigeria is the degree of confidence that some people had. I mean, like strong conviction that this is going to be a good story, you know, not like, you know, that maybe this is going to be a good story and this is like a better investment case.
I mean, not like really strong conviction. Nigeria will play out really well on the credit side in Africa, a name about which I discussed quite a bit was Zambia. I have to say, I also went to a one on one meeting, I mean, a group meeting with them.
Very good responses from their side, good interaction of investors with them. That's clearly of interest for investors on the credit side in Africa, given the bonds which have the trigger opportunity. And investors are basically looking forward for that to materialize.
Now, moving away from from Africa, I mean, definitely Kazakhstan, but also Ukraine on the credit side. So in the case of Ukraine, the session that we had on the main panel clearly ended up with a more bullish sentiment among investors because they concluded that financing is assured for at least 26, 27, based on that session. And therefore, it's much better environment for Ukrainian assets.
And they also kind of concluded that there is little impact on DSA or gross financing needs because of that, the way the financing for Ukraine is to be structured. So that was quite positive for Ukraine. At the same time, we had a lot of discussion on Ukrainian GDP warrants, but there it's a bit more complicated because growth is weak.
What keeps investors still happy about those instruments is the aspect that I just mentioned around financing. And now let me finish with Kazakhstan, which is clearly a story that I like a lot. And not just me, it seems like a lot of interest from both real money and hedge funds during the conference.
Views are not aligned, right? There is no strong conviction view here. It's a lot of interest about Kazakhstan.
So we are more in that stage. And investors believing that this could be a good opportunity to be long in either effects or local bonds. And that's because they like what the central bank has been doing.
And they also like what authorities have done in terms of fiscal consolidation. There is some skepticism whether the fiscal consolidation will really be delivered. And that's where the views are not fully aligned.
But clearly, a lot of optimism, I would say, also about Kazakhstan. Thanks for that, Niko. Katie, anything to add on LATAM?
We had a few interesting panels on LATAM politics. Were there any country stories to note? Yeah, so again, we don't technically include Argentina in our frontier space.
Again, that can be up for debate. And that was clearly on the top of minds of many investors. I don't think I managed to have a single conversation last week where it wasn't top of mind.
I think that the price action and the bonds in the last week itself speaks volumes. We did have an important announcement yesterday from Treasury Secretary Besson. But I will leave it to my colleagues, Lucila and Diego, who are experts on Argentina, to kind of digest where we are, given that it's such a fast-moving story.
But as I said, for obvious reasons, given the price action and given some of the political risks ahead of the midterms next month, and then also just, again, memories of 2018 under Macri, again, Argentina was really under the spotlight. Turning to some of the smaller stories in the frontier space, I think Ecuador was another one that was under focus last week because the government scrapped most of its diesel subsidies, which in net terms will save about 0.6% to 0.8% of GDP, again, which opens the door potentially for the country not just to muddle through on its bond payments in the next couple of years, but actually to be able to cover them. So again, it's an important structural change.
But again, here, politics is critical. So we are watching to see the tone of the protests. So far, they've been quite muted.
But that's another where, again, there was a lot of interest. Also, we have Bolivia's runoff election on October 19th between kind of a center left and then right-wing candidate. I mean, I think it's going to be a tall task no matter who wins.
And it will probably require IMF support. It's really hard to see Bolivia coming out of it any other way. And again, that's the view of our economist, Juan, who covers the story.
But again, implementation risks are so high given just the size of the imbalances and the length of time at which these imbalances have been building. I'll just finish by saying another theme that has been on our radar is just the buildup, you know, the increased U.S. involvement in the LATAM region in general. I think this matters for Central America and the Caribbean.
Again, it arguably matters here for Argentina. And then again, there are questions about what it means for Venezuela. I would say, again, in my mind, it's broadly positive and an important story to watch for many of the governments in this region, given the focus on migration and illicit drug flows that the Trump administration has taken.
However, I would stop short of saying that this is a sign that the Trump administration is focusing on regime change in Venezuela. So again, I think in LATAM, again, really politics is always the theme. And again, it can be a source of headache or it can be a source of a source of support and positive for the stories.
Great. Watch politics. That's the key thing.
That brings us to the end of this JPMorgan At Any Rate Emerging Markets Focus podcast. Thanks to you, Katie, Nikolai and Bolang for joining today. And thank you all for listening.
And we hope to have you back again with us for the next one. This communication is provided for information purposes only. Please refer to JPMorgan Research Reports related to this content for more information, including important disclosures. 2025 JPMorgan Chase & Company All Rights Reserved.