Lithuania, Serbia `Frontier' Label May Lure Investors

By Michael Tsang

Nov. 12 (Bloomberg) -- Lithuania and Serbia may see increased interest from money managers who oversee more than $3 trillion after MSCI Inc. places them in its benchmark index for frontier markets this month.

The two nations, whose companies have a combined capitalization of $1 billion, will be added in the 19-country MSCI Frontier Markets Index after the close of trading on Nov. 25, according to a statement released on the New York-based index provider's Web site yesterday.

``The move to the MSCI frontier-market index helps put these countries on the map,'' said Viktor Broczko, who helps oversee about $800 million in emerging-market equities at Progressive Developing Markets in London.

The MSCI Lithuania Index, valued at $855 million based on shares that are freely traded, includes just two stocks: AB TEO LT, the country's biggest communications company, and AB Rytu Skirstomieji Tinklai, the operator of power grids in eastern Lithuania. Shares of both Vilnius-based companies have fallen 41 percent and 51 percent, respectively, this year.

TEO lost 2.8 percent at 1:22 p.m. London time today and Rytu declined 2.2 percent.

Two banks make up the MSCI Serbia Index, which has a market value of $166 million on a so-called free-float adjusted basis. Belgrade-based Komercijalna Banka AD, Serbia's biggest bank by market value, has lost 72 percent of its value this year. AIK Banka AD has dropped 73 percent in 2008.

Ghana, Botswana

Komercijalna retreated 2 percent today and AIK Banka slipped 3.4 percent.

In addition, Ghana, Botswana, Jamaica and Trinidad & Tobago may gain so-called ``frontier market'' status by May 2009, the index provider said. The classification was created by MSCI for stock markets that have less-developed economies and financial markets than emerging markets, and that typically have more restrictions on foreign stock ownership.

Ghana's All-Share Index is the world's best performing stock benchmark this year and one of only three tracked by Bloomberg globally that has advanced in dollar terms. Shares in the country of 22.5 million, sandwiched between Togo and Ivory Coast, has gained 31 percent in 2008 in dollars.

The Botswana Stock Exchange's Domestic Company Index, which includes 16 companies valued at about $3.5 billion, has declined 3.7 percent this year. Standard Chartered Bank of Botswana Ltd., the country's third-biggest lender and the biggest stock in the index, has gained 1.3 percent.

Frontier markets have plummeted 46 percent this year, as the worst financial crisis since the 1930s buffeted companies in markets typically less correlated to industrialized economies.

To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net