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Dear Investor,

The AFC Iraq Fund was down 0.7% for January 2025, outperforming its benchmark, the Rabee Securities U. S. Dollar Equity Index (RSISX USD Index), which was down 1.4%. The AFC Iraq Fund was up 43.5% in 2024, 110.4% in 2023, and 103.9% since inception, while its benchmark was up 44.8%, 97.2%, and 47.8%, respectively. 

• Asia Frontier Capital has just released a short video discussing the Iraq investment thesis, and the drivers of the transformation of the Iraqi economy, with images that highlight the ongoing transformation of the country. The link is available on AFC’s YouTube Channel here.

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 spent the month in a tight range of + 1.8% and -1.4% around its year-end 2024 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 (chart below). This is based on two observations derived from technical analysis of trading volumes during this multi-month uptrend. Basically, technical analysis maintains that trading volumes are an important component of analysing a market’s price trend, whether it’s an uptrend or a downtrend, in that they reflect the extent of market participation, such that high trading volumes support the market’s trend, with the reverse for low trading volumes.

The first observation is that the market’s annual trading volumes support its multi-year uptrend, in that it was accompanied by meaningful increases in the annual average daily turnover –with year-over-year increases of 39.4% and 9.8% in 2024 and 2023, respectively (note: turnover is adjusted for pre-arranged block trades whether during market hours or in the special after-market session*). The second observation follows from drilling down into the daily trading turnovers as they display a similar pattern of trading volumes supporting the overall market up-trend. This is because daily trading turnovers were relatively high and increasing while prices were up trending, and relatively low and decreasing during the market’s consolidations and pullbacks within the overall uptrend (chart below).

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

Crucially, high or low trading volumes are relative to the market’s average trading volumes, and therefore, any analysis of trading volumes and price trends is subjective, especially considering the limitations of technical analysis in frontier markets with low trading volumes, such as Iraq’s nascent market. Consequently, the observations made here are considered tools to complement the fundamentals driving the market’s performance that were discussed most recently in the outlook for 2025 in “What Next After Two Gangbuster Years?” and during the AFC Iraq Fund section of Asia Frontier Capital’s latest quarterly webinar on 23^rd January 2025 providing its regular “Asian Frontier Markets Update”.

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 5.3% by the end of January 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.

UK Tax Reporting

We are pleased to inform you that all AFC Funds, including AFC Iraq Fund (non-US), will commence “UK Tax Reporting” as of the beginning of 2025. We have engaged the necessary service provider for this process. This is a significant development for UK taxpayers as it will reduce their tax rate on gains from as high as 45% to 24%.

Note:

(*)        Daily market turnover is first adjusted by removing the block, pre-arranged trades conducted during the special session following the regular trading session; subsequently, it is adjusted further by removing high-volume trades during regular market hours that show a pattern consistent with those of pre-arranged trades. High-volume trades are defined as those that are significantly higher than a given stock’s average daily turnover; and as such are subjective. Moreover, trading volumes, and trading turnovers are used interchangeably here, and defined as the values of trading turnovers in Iraqi Dinars (IQD). 

AFC Iraq Fund Marketing Information as of 31^st December 2024

Subscriptions

The next cutoff date for subscriptions will be 24^th February 2025. If you would like any assistance with 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. .

NAV as of 31^st January 2025 and performance table since inception

Regards
 
Ahmed Tabaqchali
Chief Strategist AFC Iraq Fund
This email address is being protected from spambots. You need JavaScript enabled to view it. 
 

Disclaimer:

This Newsletter is not intended as an offer or solicitation with respect to the purchase or sale of any security. No such offer or solicitation will be made prior to the delivery of the Offering Documents. Before making an investment decision, potential investors should review the Offering Documents and inform themselves as to the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares, and any foreign exchange restrictions that may be relevant thereto. This newsletter is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law and regulation, and is intended solely for the use of the person to whom it is intended. The information and opinions contained in this Newsletter have been compiled from or arrived at in good faith from sources deemed reliable. Opinions expressed are current as of the date appearing in this Newsletter only. Neither Asia Frontier Capital Ltd (AFCL), nor any of its subsidiaries or affiliates will make any representation or warranty to the accuracy or completeness of the information contained herein. Certain information contained herein constitutes “forward-looking statements”, which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of Funds managed by AFCL or its subsidiaries and affiliates may differ materially from those reflected or contemplated in such forward-looking statements. Past performance is not necessarily indicative of future results.

The AFC Iraq Fund is registered for sale to qualified/professional investors in Japan, Singapore, Switzerland, the United Kingdom, and the United States. The Fund has appointed Acolin Fund Services AG, Maintower, Thurgauerstrasse 36/38, 8050 Zurich, Switzerland, as its Swiss Representative. NPB Neue Privat Bank AG, Limmatquai 1 /am Bellevue, CH – 8024 Zürich, Switzerland is the Swiss Paying Agent. In Switzerland, shares shall be distributed exclusively to qualified investors.  The fund offering documents, articles of association and audited financial statements can be obtained free of charge from the Representative. The place of performance with respect to shares distributed in or from Switzerland is the registered office of the Representative.

By accessing information contained herein, users are deemed to be representing and warranting that they are either a Hong Kong Professional Investor or are observing the applicable laws and regulations of their relevant jurisdictions.

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