AFC Uzbekistan Fund valuations as of 31st December 2021:
Estimated weighted harmonic average trailing P/E (only companies with profit):
| Estimated weighted harmonic average P/B:
| Estimated weighted portfolio dividend yield:
The AFC Uzbekistan fund finished 2021 up an estimated 48.4%, compared to +22.7% in 2020, as the country saw continued foreign direct investments and diversification of its economy. The Fund’s performance in December was negatively affected by end of year profit-taking and weakness in listed cement companies as the government announced that the elimination of import duties on cement would be extended into 2022 in order to tame inflationary pressures in the construction industry. The country remains a net importer of cement, importing 2.5 mln tons valued at USD 122 mln in 11-months 2021. The government has been laser-focused on bringing inflation below 10% which has contributed to such policies of eliminating import duties. Conveniently, Uzbekistan ended 2021 with an inflation rate of 9.98%, achieving its inflation target. Disinflation should lead the Central Bank of Uzbekistan (CBU) to eventually loosen lending restrictions on banks, enabling accelerated credit growth, and consider a decrease in the policy rate which currently stands at 14%.
2021 can best be characterized as a transition year for Uzbekistan. The country’s GDP grew by 1.6% in 2020, even with pandemic pressures, though 2021 saw a strong rebound in growth to +7% as the country was only minimally impacted by COVID-19 due to its effective policies making the virus all but an afterthought, allowing life to return to normal and for the economy to continue its upward trajectory. Further, President Mirziyoyev won re-election in October which should provide continued regional stability in addition to consistency in government policy and economic liberalisation during his second term.
In the first 11 months of 2021, Uzbekistan’s foreign trade increased 15% to USD 37.9 bln (USD 15.46 bln of exports (+8.9%) and USD 22.48 bln of imports (+19.7%) leading to a trade deficit of USD 7.02 bln. However, remittances from Uzbekistan’s multi-million strong overseas workforce were USD 4.5 bln (+21% growth YoY) and helped to keep the trade deficit in check (it is our view that as Uzbekistan’s export sector continues to flourish, over the coming years the country’s trade deficit will return to a surplus). On this note, it is encouraging to see the country’s share of gold in its export mix having decreased from 40.9% to 26.6%, confirming Uzbekistan’s export base is both diversifying and expanding. The growth in non-gold exports and movement toward a trade surplus over the coming years is likely to also support the currency, the Uzbek Som.
In 2019 depreciation of the Som versus the USD was 13.9%. Comparably, in 2020 and 2021 deprecation was 10.2% and 3.4% respectively. As inflation continues to slow, the trade deficit narrows, and as the CBU lowers its policy rate, we expect to see continued stabilization in the currency.
While 2021 may have been a transition year on the way to significant capital markets catalysts in 2022, it was anything but quiet. Earnings growth for companies listed on the Tashkent Stock Exchange continued their strong growth. Some of the standout holdings of the AFC Uzbekistan Fund are shown below with 9-month 2021 earnings per share growth versus 2020 and third quarter 2021 book value per share growth versus 2020.