“The greater the obstacle, the more glory in overcoming it.”

– Jean Baptiste Poquelin “Moliere” - French playwright, actor, and poet

AFC Funds Performance Summary

It was another stable month for Asian frontier markets despite a volatile global environment, which continues to strengthen the case for the diversification benefits that AFC Funds offer to investors. The AFC Iraq Fund and AFC Vietnam both reported a gain for February 2025.

VIDEO Interview: The Frontier Boom You Didn’t See Coming

Ruchir Desai, the Co-Fund Manager of the AFC Asia Frontier Fund, was interviewed by Alvin Fan, CEO of OPIM, covering insights on investing in often-overlooked Asian Frontier Markets. They speak about topics ranging from the demographic-driven growth to supply chain shifts and financial innovation, and Ruchir explains why these economies are at an inflection point. They explore how macro risks are managed, why digital banking and fintech are thriving, and how investors can capitalize on this once-in-a-generation opportunity.

2025 Insights and Mandate Professional Investment Awards
 

We are proud to announce that our work has been recognized yet again with three awards. This time the awards were presented in the "2025 Insights & Mandate Professional Investment Awards". We received the following awards:

• AFC Vietnam Fund – Best performing fund over 10 years in the category ASEAN Equity
• AFC Asia Frontier Fund - Best performing fund over 5 years in the category Frontier Markets Equity
• AFC Iraq Fund - Best performing fund over 3 years in the category Frontier Markets Equity

These awards serve as validation for the investment thesis of investing in frontier markets, emphasizing its effectiveness as a diversification tool for equity investors.

AFC Uzbekistan Fund Investor Day 2025

AFC is planning to host its 4^th AFC Uzbekistan Investor Tour, bringing existing and prospective investors to experience the reality of Uzbekistan from the ground. We have revised the tour concept and will be hosting a day tour on 27^th May 2025. This will include a half-day tour of Tashkent and a visit to one of the fund’s portfolio companies, followed by dinner. If you are interested in attending, please write us at This email address is being protected from spambots. You need JavaScript enabled to view it. to express your interest, and we will follow up with you.

March 2025 Subscription Cut-Off Date

The next cut-off date for subscriptions for our funds will be 25^th March 2025. If you would like to know more about the subscription process, please get in touch with us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Please find below the managers’ comments on each of our four funds for February 2025.

AFC in the Press

Upcoming AFC Travel

Thomas Hugger, Ruchir Desai, and Peter de Vries are based in Hong Kong, while Andreas Vogelsanger is based in Bangkok, Vicente Nguyen in Ho Chi Minh City, Scott Osheroff in Tashkent, and Ahmed Tabaqchali in London and Iraq. If you have an interest in meeting with our team at their homeports or during their travels, please contact Peter de Vries at This email address is being protected from spambots. You need JavaScript enabled to view it.

AFC Travel

AFC Vietnam Fund - Manager Comment

The AFC Vietnam Fund returned +2.0% in February with a NAV of USD 3,506.21, bringing the 2025 return to +1.1% and return since inception to +250.6%. This month, the fund outperformed the benchmark, the Ho Chi Minh City VN Index, which gained 1.3% in February 2025 in USD terms. The fund’s annualised return since inception stands at +11.9% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.54%, a Sharpe ratio of 0.69, and a low correlation of the fund versus the MSCI World Index USD of 0.50, all based on monthly observations since inception.

The Vietnamese stock market reopened on 3^rd February 2025, after the long Tet holiday, to a weaker VND, primarily driven by the strength of the USD. While the VN-Index gained 3.2% in local currency, its increase in USD terms was more modest at 1.3%, reflecting the 1.9% appreciation of the USD against the VND in February. The VN-Index successfully surpassed the physical level of 1,300 to close at 1,305.36 points, showing a bullish uptrend.

From a technical perspective, the VN-Index has been trading within a narrow, upward-trending channel since Q4 2023, with support and resistance levels tightening. This pattern suggests that a breakout is imminent, with a strong likelihood of an upward move. A robust macroeconomic environment further supports the bullish outlook, including Vietnam’s aggressive public investment plans, solid GDP growth, and continued strong FDI inflows. Moreover, the potential upgrade by FTSE from a Frontier Market to an Emerging Market in 2025 could serve as a significant catalyst, attracting new foreign capital into the market. Given these factors, we believe the current setup presents a compelling buying opportunity for new investors or for existing investors looking to increase their positions ahead of a potential breakout.

The VN-Index Surpassed the 1,300 Level

Market Developments

Despite being the shortest month of the year, February was packed with challenges for investors. Market sentiment turned cautious when U.S. President Trump imposed tariffs on goods from Mexico, Canada, and China. The situation escalated further when he announced a 25% tariff on imported steel, applying to all exporting countries, including Vietnam. This decision rattled investor confidence, causing the VN-Index to drop nearly 1% in a single day. Concerns over the potential impact of this policy spread quickly, leading to increased market volatility.

According to SSI Securities Corporation (SSI), Vietnam’s largest brokerage firm, the newly announced tariffs may not be as detrimental as initially feared. The policy is essentially an expansion of Section 232, imposing a uniform 25% tariff on steel and aluminium imports from all countries. Since Vietnamese steel exports to the U.S. have been subject to this rate since 2018, the impact on Vietnam’s steel industry remains unchanged. The most affected nations are those that previously benefited from exemptions, including Argentina, Brazil, Canada, the EU, South Korea, Japan, and the UK.

This policy shift effectively levels the playing field for Vietnam, as U.S. allies who once exported steel to the U.S. at a 0% tariff will now face the same 25% duty. As a result, Vietnamese steel producers such as Hòa Phát Group (HPG), Nam Kim Steel (NKG), Hoa Sen Group (HSG), and Gia Đại (GDA) could see improved export prospects to the U.S. However, increased competition is likely in other international markets as steel from affected countries is redirected elsewhere. It is important to note that these assessments are based on U.S. media reports, as the official government document has yet to be released. This development underscores the fact that trade barriers do not always have universally negative consequences —Vietnam, in this case, may emerge in a more advantageous position.

President Trump Says Value-Added Taxes (VAT) Will Be Considered The Same As Tariffs

Trump's plan to treat value-added tax (VAT) systems like tariffs when calculating reciprocal levies on imports into the U.S. could have significant trade implications, particularly for countries with high VAT rates like those in the European Union. Since the EU's average VAT rate is nearly 22%, this policy shift could lead to higher U.S. tariffs on European goods. Trump has ordered trade officials to develop a country-specific tariff calculation method that considers VAT levels, regulatory policies, and business environments, with the study due by 1^st April 2025.

Vietnam, however, would likely not suffer too much under this policy. The Vietnamese VAT is currently at 8%, while the average U.S. sales tax is around 5%. This suggests that Vietnam might face an additional tariff of only about 3% on its exports to the U.S., which is much lower than the potential tariffs on EU goods or Chinese goods. As a result, Vietnam’s exports may remain relatively competitive under the proposed system, but we should know more at the beginning of April.

The Strong USD

The USD demonstrated significant strength in global financial markets throughout February, with the Dollar Index surging 7.4% from Sep 2024 to a new high. This appreciation was fuelled by continued investor demand for safe-haven assets, expectations of prolonged higher interest rates in the U.S., and capital flows favouring USD-denominated investments. The stronger USD put pressure on emerging market currencies, including the VND, which depreciated despite Vietnam’s solid economic fundamentals. While currency fluctuations may continue to impact short-term market movements, we remain confident in Vietnam’s long-term growth trajectory and the resilience of its equity market.

USD/VND Exchange Rate from February 2024 to February 2025

2024 Fourth-Quarter Financial Reports

After the Tet holidays, all listed companies released their fourth-quarter financial reports. Based on our internal calculations, the AFC Vietnam Fund’s portfolio recorded an impressive earnings growth of over 23% in 4Q 2024. Notably, eight out of our ten largest holdings delivered strong business performance, reinforcing our confidence in our investment strategy.

Among them, Agriculture Bank Insurance (ABI), one of our top ten positions, demonstrated a significant recovery in profitability and stock performance. In Q4, ABI’s net profit surged 119% year-over-year, while insurance premiums grew by a robust 21% YoY, reaching VND 674 billion (approximately USD 27 million). This recovery provided much-needed support for ABI’s stock, which had experienced a sharp decline in September following the impact of Typhoon Yagi on the insurance sector.

Agriculture Bank Insurance (ABI) versus VN Index from March 2024 to February 2025

Currently, we believe ABI remains significantly undervalued. The company is trading at a P/E ratio of 9x, a P/B ratio of 1.3x, and offers an attractive dividend yield of 7%. What sets ABI apart is its exceptionally strong balance sheet, with a cash balance of USD 130 mn — far exceeding its market capitalization of just USD 82 mn — and no bank debt at all.

Furthermore, ABI is expected to transition its listing from UPCOM to HOSE in 2025. This move, coupled with its solid earnings growth of 20%, could serve as a major catalyst for the stock’s performance this year. Given its strong financial foundation and growth potential, we remain highly optimistic about ABI’s future trajectory.

2025 GDP Growth Target of 8%

In February, the Vietnamese government submitted a proposal to the National Assembly to revise the GDP growth target for 2025. The new target has been adjusted to 8%, up from the previously set range of 6.5-7.0%. Public investment will be a key driver of this ambitious growth goal, prompting the National Assembly to approve a significant increase in public investment capital for 2025. The newly approved budget stands at VND 875,000 bn (USD 36 bn), a sharp rise from VND 680,000 bn (USD 27 bn) in 2024. This massive investment package is expected to contribute approximately 1.2% to GDP growth and create substantial opportunities for companies in the sector, including Lam Dong Minerals and Building Materials (LBM) and Coteccons Construction (CTD) — two of our top five holdings.

While we have frequently discussed LBM in past updates, we would like to highlight CTD, Vietnam’s largest construction company. The AFC Vietnam Fund has a long history with CTD, having first invested in the company in its early years of the fund. CTD experienced rapid growth between 2014 and 2017 but was severely impacted by internal conflicts, leading to a significant downturn. We exited our position in mid-2017 when the former CEO departed, sparking a prolonged crisis that saw net profit plunge from VND 1,653 bn in 2017 to just VND 21 bn in 2022. However, after meeting CTD’s leadership team in June 2023 while they were constructing a USD 1 bn factory for LEGO Group, we recognized the company’s strategic transformation and restructuring efforts. CTD has now shifted its focus to the high-potential FDI construction segment, a market with over USD 20 bn in annual disbursements. Seeing this turnaround, we re-entered our position in late 2023, confident in CTD’s renewed growth trajectory. Indeed, following its restructuring, CTD’s net profit rebounded to VND 243 bn in 2023 and VND 435 bn in 2024. We anticipate further growth, with net profit potentially reaching VND 600 bn in 2025. CTD is still trading below book value at its current valuation, presenting an attractive investment opportunity.

Net Profit of Coteccons Construction (CTD) Over the Last 10 Years (VND bn)

Besides its expansion into the FDI construction segment, CTD has also strategically diversified into the public investment sector, securing multiple large-scale projects. Given the Vietnamese government's aggressive public investment plans for 2025-2030, CTD is well-positioned to capitalize on this trend. With a significantly increased budget allocation for infrastructure and construction, the company is expected to secure even more projects, further strengthening its revenue streams.

This diversification provides CTD with a balanced growth strategy, allowing it to benefit from both foreign direct investment (FDI) and government-funded infrastructure projects. As public investment surges and Vietnam prioritizes infrastructure development, CTD stands to gain considerably, reinforcing our confidence in its long-term growth potential.

Coteccons Construction (CTD) versus VN Index from October 2024 to February 2025

At the end of February 2025, the fund’s largest positions were: Lam Dong Minerals and Building Materials (8.5%) – a building material supplier, Agriculture Bank Insurance (6.7%) – an insurance company, Thien Long Group (6.0%) – a manufacturer of office supplies, Dong Hai JSC of Bentre (5.8%) – a packaging manufacturing company, and Hang Xanh Motors Service (5.8%) – a Mercedes-Benz dealership.

The portfolio was invested in 38 names and held 7.1% in cash. The sectors with the largest allocation of assets were consumer (38.1%) and financials (26.0%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 11.23x, the estimated weighted harmonic average P/B ratio was 1.35x, and the estimated weighted average portfolio dividend yield was 3.42%. The fund’s portfolio carbon footprint is 1.19 tons per USD 1 mn invested.

AFC Iraq Fund - Manager Comment

The AFC Iraq Fund Class D shares returned +0.4% in February 2025 with a NAV of USD 2,047.34, outperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which gained 0.03% during the month. The fund gained 43.5% in 2024 on the back of a stellar performance in 2023 of +110.4%. The fund is down by 0.3% for the year versus 1.4% for the index. Since inception, the fund has gained 104.7% while the RSISUSD index is up by 47.8%, an outperformance of 56.9%. The annualized return since inception of the fund stands at +7.7% p.a.

The RSISX USD Index continued with the process of consolidating its gains that started in December 2024, following a blistering 35.9% rally since late August 2024, and just as in January 2025, spent the month in a tight range of + 1.8% and -0.8% around its prior month’s close. While this consolidation could continue over the next few weeks, the market’s technical picture continues to be positive, and the likely consolidation or pullback should be within its multi-month uptrend as much as the prior consolidations and pullbacks have done over the prior months. Trading volumes continue to support this thesis, as the average daily turnover for the month followed the patterns discussed last month in “Trading Volumes Support Market’s Uptrend” (chart below, adjusted for block trades*).

Rabee Securities U.S. Dollar Equity Index and Daily Turnover

For the second year in a row, the top banks in the country reported outstanding net profit and equity growth in 2024, building upon a similarly outstanding growth in 2023 as reported last year in “Banks End the Year with a Bang”.

Year-over-Year Comparisons

As discussed in “What Next After Two Gangbuster Years?”, the growth of bank net profit and equity growth in 2025 will be from a much higher base, and the acceleration should slow down from the heady rates of the past two years, leading to a new normal for the group. In this new normal, the future growth trajectories of the top banks will be from a much higher base and from a significantly improved financial position. Moreover, this new normal will be marked by an increased adoption of banking and formality, coupled with a move away from the dominance of cash and informality -developments that the investment thesis for the banking sector contends would come with growth in bank lending, resulting in an expansion of the money circulating in the economy and consequently to a meaningful increase in non-oil GDP. Over time, this should support the growth in top banks’ net profits and ultimately feed into higher stock market valuations - driven by net-profit growth and by the increases in market multiples placed upon these net profits.

We continue to believe that the upside opportunity for the AFC Iraq Fund will come about as the RSISX USD Index, having surpassed its 2014 peak by 5.4% by the end of February 2025, rallies further, reflecting the powerful dynamics discussed here over the last few months. However, risks remain given Iraq’s recent history of conflict, extreme leverage to volatile oil prices, as well as the risk that a widening of the current Middle East conflict will not be contained and evolve to destabilise the region – even though the temporary ceasefires in Gaza and in Lebanon, as well as the developments in Syria lowered the likelihood of a widening.

At the end of February 2025, the AFC Iraq Fund was invested in 8 names and had a cash level of 6.9%. The fund invests in both local and foreign-listed companies that have the majority of their business activities in Iraq. The markets with the largest asset allocation were Iraq (91.8%), Norway (1.1%), and the U.K. (0.2%).

The sectors with the largest allocation of assets were financials (72.2%) and communications (11.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.44x, the estimated weighted harmonic average P/B ratio was 1.73x, and the estimated weighted average portfolio dividend yield was 3.46%. The fund’s portfolio carbon footprint is 0.07 tons per USD 1 mn invested.

 AFC Asia Frontier Fund - Manager Comment

The AFC Asia Frontier Fund (AAFF) USD A-shares returned −0.1% in February 2025 with a NAV of USD 1,915.33. The fund underperformed the benchmark MSCI Frontier Markets Asia Net Total Return USD Index (+1.3%) and the MSCI Frontier Markets Net Total Return USD Index (+1.9%) and outperformed the MSCI World Net Total Return USD Index (−0.7%). In 2025, the fund shows a +0.2% return, underperforming the benchmark, which went up by 1.5%. The performance of the AFC Asia Frontier Fund A-shares since inception on 30^th March 2012 now stands at +91.5% versus the benchmark, which is down by 19.8% during the same period, showing an outperformance of +111.3% since inception. The fund’s annualized performance since inception is +5.2%. The broad diversification of the fund’s portfolio has resulted in lower risk with an annualised volatility of 10.4% and a correlation of the fund versus the MSCI World Net Total Return USD Index of 0.48, all based on monthly observations since inception.

It was another stable month for the AFC Asia Frontier Fund despite a volatile month for the U.S. markets with the S&P 500 Index and NASDAQ Composite Index declining by -1.4% and -4.0% respectively. This once again goes to show how the AFC Asia Frontier Fund offers investors a lower correlation to developed markets.

The main positive drivers of performance in February 2025 were Georgia, Kazakhstan, Pakistan, Bangladesh, and Iraq. The key negative contributors to performance were Vietnam, Uzbekistan, and Sri Lanka.

As discussed in our Outlook for 2025, we anticipated that any discussions about a possible truce in Ukraine will be positive for the fund’s holdings in Central Asia as these stocks have received a geopolitical discount post the war in Ukraine. 

This theme appears to be playing out as the fund’s holdings in Georgia have rallied nicely since the U.S. began discussing a possible truce between Russia and Ukraine. In addition to this, very strong 4Q24 results from TBC Bank and Lion Finance Group (previously Bank of Georgia) in Georgia and Kaspi in Kazakhstan are also a positive signs for these companies.

TBC Bank and Lion Finance Group reported 4Q24 net profit growth of +15% and +54% respectively while Kaspi’s 4Q24 net profits grew by +28%. The 2025 outlook for all three companies ames remains robust and we would not be surprised to see a further upward re-rating in our Central Asian stock holdings in the event of more positive news flow on the Russia-Ukraine conflict.

The Fund’s Key Holdings in Georgia have Re-Rated Upwards Post the Talk of Compromise in Ukraine

As anticipated in Sri Lanka as well, the fund’s bank holdings Commercial Bank of Ceylon and Hatton National Bank declared exceptional quarterly results in 4Q24 on the back of large provision write backs now that Sri Lanka’s international sovereign bonds have been restructured on much better terms than initially expected. Furthermore, a robust pick up in both the banks’ loan books on the back of a strong economic recovery in Sri Lanka is also supporting profitability.

Commercial Bank of Ceylon and Hatton National Bank have been among the top performers for the fund in the last two years but still trade very attractively at a P/B ratio of only 0.9x and 0.8x respectively while their Return on Equity now stands at 22.1% and 20.4% respectively.

Commercial Bank of Ceylon and Hatton National Bank in Sri Lanka have Witnessed a Huge Improvement in Profitability as Sri Lanka’s Economy Comes Back Strongly 
(Quarterly Net Profits in LKR million)

The best-performing indexes in the AAFF universe in February were Vietnam (+3.2%) and Bangladesh (+2.6%). The poorest-performing markets were Sri Lanka (−3.8%) and Pakistan (−0.9%). The top-performing portfolio stocks this month were a Mongolian junior gold miner (+30.4%), a Georgian bank (+28.7%), a Pakistani cement producer (+20.6%), another Mongolian junior gold miner (+16.9%), and another Georgian bank (+11.3%).

In February, the fund exited a Bangladeshi cement producer and a Bangladeshi industrial gas producer and added to existing positions in Bangladesh and Mongolia. The fund also reduced some existing positions in Mongolia.

At the end of February 2025, the portfolio was invested in 58 companies, 2 funds, and held 2.7% in cash. The two biggest stock positions were an information technology company in Vietnam (4.2%) and a cement producer in Pakistan (3.5%). The countries with the largest asset allocation were Pakistan (18.8%), Sri Lanka (12.7%), and Vietnam (10.2%). The sectors with the largest allocation of assets were financials (32.2%) and consumer goods (21.2%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.81x, the estimated weighted harmonic average P/B ratio was 1.28x, and the estimated weighted average portfolio dividend yield was 3.48%. The fund’s portfolio carbon footprint is 0.49 tons per USD 1 mn invested.

AFC Uzbekistan Fund - Manager Comment

The AFC Uzbekistan Fund Class F shares returned −3.5% in February 2025 with a NAV of USD 1,235.96, bringing the return since inception (29^th March 2019) to +23.6%. On an annualised basis, the fund has returned +3.6% p.a. with a Sharpe ratio of 0.08.

Market performance during February was impacted by the typical selling we have seen around the start of the Ramadan holiday (which started on 28^th February 2025), and other big holidays for that matter, when local investors raise capital for holiday expenses as workloads downshift and more time is spent with family, especially during the nightly iftar meals. However, we look at this month as a temporary blip as, broadly speaking, the market appears to be going through a bottoming process as indicated over the past few months.

Franklin Templeton Advances SOE Holding Company

On 3^rd February 2025, the National Investment Fund of the Republic of Uzbekistan and Franklin Templeton Asset Management announced the signing of an investment agreement on asset management for the Uzbek state’s holdings in 18 state-owned enterprises (SOEs) in order to increase their investment attractiveness through enhancing operational efficiency, corporate governance, and transparency. The ultimate plan is a dual listing of this vehicle targeted for sometime in 2026 on both the Tashkent Stock Exchange and the London Stock Exchange, mirroring what Franklin Templeton did with the Fondul Proprietatea Fund with the Romanian government last decade.

In our discussions with contacts in Tashkent, it seems that the government is eager to give Franklin Templeton significant freedom and flexibility in managing the vehicle that oversees the government's equity holdings in various SOEs. The government recognizes that many SOEs are not operating efficiently, which presents an opportunity to involve a third party to enhance their efficiency and profitability. There are also potential plans for future spinoff IPOs of individual SOEs, similar to what occurred in Romania in July 2023. During that time, the Romanian electricity provider Hidroelectrica made history by launching the largest IPO in the history of the Bucharest Stock Exchange, raising €1.9 billion.

New Share Classes for Investors

In January 2025, we introduced new share classes to offer flexibility for both existing and new investors. Class G USD, which has lower fees: a 1.7% management fee and a 17% performance fee with a high watermark, while it requires a longer redemption notice of 180 days compared with the F USD shares of 90 days. The minimum investment is the same at USD 10,000 for non-US investors and USD 50,000 for US investors.

Furthermore, we launched two institutional share classes, each with a minimum investment of USD 5 million. The Class FI USD will have a 1.5% management fee, a 20% performance fee with a high watermark, and 90 days redemption notice. The Class GI USD will have a 1.3% management fee, a 17% performance fee with high watermark, and 180 days redemption notice.

Interested investors should contact Peter de Vries at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information, or if existing investors wish to switch into the new share class to benefit from lower fees.

AFC Uzbekistan Fund Investor Day 2025

AFC is planning to host its 4^th AFC Uzbekistan Investor Tour, bringing existing and prospective investors to experience the reality of Uzbekistan from the ground. We have revised the tour concept and will be hosting a day tour on 27^th May 2025. This will include a half-day tour of Tashkent, a visit to one of the fund’s portfolio companies, followed by dinner. If you are interested in attending, please write us at This email address is being protected from spambots. You need JavaScript enabled to view it. to express your interest, and we will follow up with you.

At the end of February 2025, the fund was invested in 23 names and held 7.3% cash. The portfolio was allocated to Uzbekistan (92.6%) and Kyrgyzstan (0.1%). The sectors with the largest allocation of assets were financials (45.1%) and materials (25.1%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 3.92x, the estimated weighted harmonic average P/B ratio was 0.64x, and the estimated weighted average portfolio dividend yield was 3.13%.

I hope you have enjoyed reading this newsletter. If you would like any further information, please get in touch with me or my colleagues at This email address is being protected from spambots. You need JavaScript enabled to view it.

With kind regards,

Thomas Hugger
CEO & Fund Manager

This email address is being protected from spambots. You need JavaScript enabled to view it.