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An international investment expert, Mark Mobius, has listed Nigeria as one of the most attractive markets among the frontier markets.

Bloomberg News quoted the Singapore-based Executive Chairman of Templeton Asset Management, as saying that about 10 per cent of his holdings were in frontier nations and that Nigeria, Africa's biggest oil producer, was among the most attractive markets.

'Frontier markets in general are quite exciting,' Mobius said. 'The valuations are still interesting in those markets,' he added

Nigerian Breweries Plc, the country's biggest brewer, was ranked among the 10 largest holdings in Templeton's Frontier Markets Fund as at December 31, data compiled by Bloomberg show.

The Lagos-based company reported a nine per cent gain in 2009 profit, and the shares have risen by 17 per cent this year.

Stocks in the smallest developing markets are beating their larger peers by the most in almost five years and Mobius said they would keep rallying as consumer demand picked up.

The emerging-market gauge climbed by 1.2 per cent to 1,022.72 as at 7.49a.m. in New York. Among frontier markets, Vietnam's VN Index advanced by 1.8 per cent while Romania's BET Index gained 1.7 per cent and Nigeria's All Share Index rose by 1.2 per cent. Ukraine's PFTS Index fell by 2.3 per cent.

Frontier markets are outperforming even as analysts cut 'buy' ratings this year in 10 of 14 countries tracked by Bloomberg and forecast earnings will trail those in the so- called BRIC (Brazil, Russia, India and China) nations.

The estimates ignore the boost to profits from rising commodities and consumer demand in the smaller markets, making them among the best 'contrarian' bets, Mobius, who oversees about $34bn in developing nations.

'We may go into an era where the small markets are going to steal the show,' Antoine van Agtmael, who coined the term 'emerging markets' in 1981 and now oversees about $13bn at Emerging Markets Management LLC in Arlington, Virginia, said. 'They have not been fully discovered but are very interesting, quite attractively priced and show a lot of promise,' he added.

The MSCI frontier index's 29 per cent price-to-book discount to the emerging gauge is more than double the average 14 per cent since Bloomberg began compiling the data in July 2008. The frontier gauge yields 2.9 per cent in dividends, compared with two per cent for the MSCI emerging index, Bloomberg data show.

While overall earnings are forecast to grow faster in the biggest developing countries, they are valued at cheaper levels in frontier markets. The MSCI frontier gauge of companies with an average market value of $2.1bn trades at 10 times this year's profit estimates, compared with 13 times for the emerging index, where the average company has a value of $8.7bn.

'You are taking slightly larger risks in terms of liquidity and transparency of these markets, but right now you're getting paid well for taking on those risks,' HSBC Holdings Plc's Andrea Nannini, whose New Frontiers Fund rose by 71 per cent in the 12 months through February, beating the MSCI frontier index by 20 percentage points, said. 'There may be not a lot of obvious value left in the larger emerging markets,' he added.

The outperformance of frontier markets is making analysts less optimistic. They cut buy ratings on shares in Romania to 37.6 per cent of the total last month, the lowest level since Bloomberg began tracking at least 20 ratings in the country in July 2005. Recommendations in Kenya, Kuwait, Oman and Bahrain also sank to record lows, Bloomberg data show.