Frontier markets have joined higher profile emerging markets such as China and India as the world's strongest performers, according to a new report on emerging market equities by Standard & Poor's, the world's foremost provider of financial market intelligence.

According to the report, "Equity Insight: Why Emerging Markets are Becoming a Key Ingredient in the Recipe for High Portfolio Returns," investments in the newer emerging markets are now common among the portfolios of leading international investors. The S&P Frontier Index, which consists of 22 countries including Bangladesh, Cote'D'Ivoire, Ecuador, Estonia, Kenya, Latvia, Lithuania, and Mauritius, has achieved annualized growth of more than 36% over the last five years - more than China, Korea, Mexico and other established emerging markets.

Some of these smaller markets, which are enjoying rapid growth either due to higher commodity prices or economic and structural reforms, have achieved returns of 50% or more over the last five years, including Slovak Republic, Romania, Bulgaria, Kenya, and Ukraine. The S&P/Vietnam Frontier Index, launched in 2006, grew 128% last year and has already gained 60% in the first two months of 2007.

Other markets outside the "mainstream" emerging markets - and excluded from emerging market index series because of smaller size, lower liquidity or limited access - have also been providing attractive returns, according to the report. The S&P/IFCG GCC Index, comprised of markets from the Persian Gulf countries, was down 39% in 2006, but this followed a 112% gain in 2005.

"Emerging market stock investments have become a must-have for major investment portfolios," says Alka Banerjee, Vice President of Standard & Poor's Index Services. "Though at times attention has been focused on the BRIC economies - Brazil, Russia, India and China, emerging markets as a whole have been the best performers, not just a targeted few."