AFC Uzbekistan Fund valuations as of 30th April 2025:
|
Estimated Weighted harmonic average trailing P/E (only companies with profit):
|
3.53x |
| Estimated Weighted harmonic average P/B: |
0.60x |
| Estimated Weighted portfolio dividend yield: |
2.61% |
American Liberation Day Tariffs
While the tariffs imposed by Donald Trump's Liberation Day created widespread chaos and a risk-off sentiment in global financial markets, Uzbekistan remained largely unaffected. Due to its uncorrelated and minimally integrated capital markets, the country did not experience negative repercussions. Although America imposed a minimum 10% tariff on Uzbekistan—where trade is limited and primarily involves some agricultural exports like capers—this situation is not expected to significantly impact the Uzbek economy. In 2024, exports to the U.S. accounted for just 1.18% of Uzbekistan’s total USD 26.9 billion in exports.
Thus, we do not anticipate any significant fallout from the tariffs, as Uzbekistan continues to strengthen its trading ties with the broader New Fertile Crescent. This is the region we termed, stretching from Russia and China, through Central Asia and down into the middle, including India and Pakistan as well. Current developments include plans for Uzbekistan to purchase Chinese J-35A fighter jets and implement Chinese air defense systems, indicating a preference for regional products over Western or American options.
New Presidential Decree on SOE Privatisations
After a lengthy period of stagnation in both capital markets news and equity performance—marked by ongoing downward pressure on trading volumes—there was very positive news in April regarding the country’s long-standing effort to privatise state-owned enterprises (SOEs).
On 21st April 2025, President Mirziyoyev signed a decree targeting the privatization of 29 SOEs, with plans for 12 of these to be dual-listed on both international and local stock exchanges. While dual-listing on the London Stock Exchange is likely, the strong IPO market in Abu Dhabi and the close relationship between the UAE and Uzbekistan presents another viable listing option. This process is expected to take several years, during which SOEs will focus on enhancing operational efficiency, transparency, and restructuring their boards.
The decree also calls for international roadshows to promote these planned IPOs, reflecting the government's recognition that effective promotion and attractive IPO pricing are essential to stimulating investor interest. Previously, the April 2024 decree on IPO privatisations mandated that only 2% to 5% of shares be sold, which we—and likely many foreign investors—found insufficient to motivate interest in these companies. Thankfully, the current decree has revised the free float to between 10% and 25%. Notably, the two crown jewels of the Uzbek economy, Navoi Gold and Almalyk (a copper mine), were initially slated to issue only 2% of their shares in an international IPO. This share has now been increased to between 10% and 15%, likely depending on demand.
While the privatisation process is expected to progress slowly, we are optimistic as long as advancements continue. This transformation of Uzbekistan's economy is crucial, especially considering that many companies slated for IPOs are still not fully prepared due to their board compositions and overall operational efficiency. The government has set a timeline for announcing tender processes for most of these IPOs from 2026 to 2028, with Navoi Gold expected to lead the way in the second half of 2025. This will be followed up by the National Investment Fund which has stakes in 18 companies worth approximately USD 1.6 bln and which is managed by international asset manager Franklin Templeton.
We will be following this process closely and hope things can move ahead steadily toward eventual IPOs. The country now has the opportunity to execute this correctly, successfully launching strong companies at attractive prices. This could lead to a transformation of Uzbekistan’s capital markets, kickstarting private sector IPOs, or be a flop of overpriced entities that haven’t completed their transformations which few investors are willing to pay up for. Being that the privatisation process for IPOs has been delayed several times, we are of the mindset that the government does want this to be a success, but in prior announcements it has perhaps been too bold on timelines. Prudence throughout this process should be well rewarded, and should greatly benefit the AFC Uzbekistan Fund.
| 
