Mobius thinks Egypt should be reclassified as frontier: Emerging markets icon Mark Mobius said he believes the Philippines and Egypt should be demoted to frontier market status, according to Fund Strategy. Mobius also believes Pakistan should not “graduate” into the emerging market index (it’s set for an upgrade at the end of this month) and that Templeton will continue investing in the country through its Frontier Market fund. Mobius takes issue with using “free float” as the driver of the classification. He says “if the market capitalisation rises and if the trading turnover increases and the number of shares increases through IPOs and other measures, then the free float increases and they want to graduate. That doesn’t really mean the companies increase their governance or improve their behaviour.”

…Mobius’ statements appear to come from a place of love, as he tells the Financial Times that he sees frontier markets as an incredible investment opportunity. “Demographics are very impressive. Urbanisation has a long way to go. Financial penetration is low, therefore there is big potential for growth,” he said. This view goes against what appears to be a recent conventional wisdom, as investors pull their funds out of frontier markets since February. These outflows stand in stark contrast to the rally behind emerging markets as a whole, according to the salmon-colored paper. As we noted earlier this week, Mobius is putting his AUM where his mouth is, resurrecting Templeton’s frontier fund.

Taking an alternative view to placing Egypt and Pakistan in the same category is Mattias Martinsson, CIO of Swedish frontier markets asset manager Tundra Fonder. He tells Frontera that Egypt, which is currently in the recovery phase and lags 4-5 years behind Pakistan, which is in its expansion phase. Egypt remains one its promising new investments. Tundra had been drawn to Egypt following the float and has invested in the likes of Suez Cement, El Sewedy, GB Auto, and Juhayna.