Starting From Scratch

There was a question about frontier investing that got me to thinking that an example of how to start researching one of the countries could be worthwhile. One of the countries mentioned in the Barron's article was Zambia. To be crystal clear I have no intention of investing money there personally or for clients, this is just an example. Frontier investing has merit, I have small exposure to another frontier country, this is just a primer on how to get started. I'll also add that for me the usual catalyst for me to learn about a new country will be something positive and compelling I might read somewhere, but that was not the case with Zambia.

A good starting point is the Wikipedia page for the country, and there is one for Zambia. This page tells us the inflation was 18% last year, GDP grew at 5.1%, 85% of the work force works in agriculture, they export copper and cobalt, they import almost every thing else. There are big issues with life expectancy, health, poverty and so on. There would not seem to be room for things to get too much worse (but I obviously can't predict something like this) and a lot of room for things to improve. To be clear, social and economic improvement may not come in this century if ever.

Next stop; the central bank web site. Like the sites of most central banks there is an English version. This will give more up to date data than the Wikipedia page. It looks like five year government debt yields 13% and six month T-bills yield 9.5%.

After that you can go to ADR.com and see if there are any stocks, I found one, Zambia Copper Investments. Yahoo Finance knows the symbol as ZMBBY, but Schwab has it as ZMBBF. The company has a website and its annual report is in PDF format. The company is tiny, its primary listing is in South Africa, the numbers are not very inspiring but the stock has correlated closely to BHP Billiton which I find interesting.

For a lot more risk you had the same return. This only makes sense if you think Zambia, and by extension Zambia Copper as a proxy, will go through a big transformation.

Since Zambia Copper appears to be the only stock for now you can do an Internet search where you will find plenty of hits. I would also suggest a Technorati search as well which seems to reveal an investment in Zambia by Chinese concerns. This makes some sense as 13% of Zambia's exports (according to the Wikipedia page), think copper, are to China.

I also want to be in touch with the currency of a country if possible and BigCharts does have data on the Zambian kwacha. The last year has certainly been a wild ride for the kwacha. I would not expect this to change too much in the near future.

So at this point what have we got? Really a vague familiarity with the country and the stock. If you read some of the various search hits and combed through the central bank you will know a little more. Now comes some follow up reading, maybe adding a term or two to your news feed and maybe every few months learn more about the destination and the stock.

There is no real hurry. If Zambia or any other frontier country is going to become the next China it will take years and years and you will not be late even if you spend half a decade learning the story.

This kind of work may not be for you, after all even if you fall in love with a frontier market, how much will you invest in one?