ASF header

Asia Frontier Capital (AFC) - August 2020 Update

“Diversify across securities, across asset classes, across markets — and across time.” ― Burton G. Malkiel, The Elements


“Diversify across securities, across asset classes, across markets — and across time.”

Burton G. Malkiel, The Elements of Investing: Easy Lessons for Every Investor


AFC Asia Frontier Fund USD A 1,221.99+4.3%−4.0%+22.2%
AFC Frontier Asia Adjusted Index2 +7.3%−5.4%+3.0%
AFC Iraq Fund USD D607.07+2.5%−3.2%−39.3%
Rabee RSISX Index (in USD) +3.7%−2.9%−53.8%
AFC Uzbekistan Fund F1,107.91+6.7%+1.3%+10.8%
AFC Vietnam Fund USD C1,774.14+8.6%−0.8%+77.4%
Ho Chi Minh City VN Index (in USD) +10.4%−8.3%+57.9%
  1. The NAV given is for the main share series for the relevant master fund. Investor’s holdings may be in a different share class or series or  currency and have a different NAV. See the factsheets and/or your statement for full details.
  2. The index was adjusted on 1st June 2017. Prior to that it consisted 100% of the MSCI Frontier Markets Asia Net Total Return USD Index, and after 1st June 2017 it consists of 37% of that index and 63% of the Karachi Stock Exchange 100 Index in USD.
  3. NAV and performance figures are all net of fees.

Asian frontier markets had a very strong month but valuations are still attractive

The AFC Asia Frontier Fund saw most of its larger markets make good gains in August led by Bangladesh which was the best performing market globally with a gain of 15.8%. Lower interest rates, increasing exports and remittances, and a reopening of the economy have led to this rally on the Dhaka Stock Exchange. Vietnam witnessed a strong rally as it has flattened the curve of the second wave of virus cases while Pakistan and Sri Lanka saw gains on the back of continued positive investor sentiment.

Furthermore, Asian frontier markets have continued to rally since March 2020 despite persistent foreign selling as domestic investors have stepped in. Lower interest rates and discounted valuations continue to attract domestic investors while foreign investors remain net sellers at bottomed out valuations.



(Source: Bloomberg)



(Source: Bloomberg, P/E’s adjusted for only positive earnings)



(Source: City Brokerage, CT CLSA Securities, SSI Securities, Topline Securities, net foreign sales from 1st January 2020 – 31st August 2020)


Pakistan is the 4th best performing market globally over the past twelve months

Market sentiment in Pakistan had already turned positive pre-pandemic as macroeconomic indicators like the current account deficit and foreign exchange reserves had stabilised. Even post pandemic, lower interest rates, a big drop in COVID-19 cases, and a recovery in domestic demand and exports has led to Pakistan outperforming all regional peers over the past year. Valuations for the KSE100 Index remain attractive at an adjusted P/E of 7.5x.



(Source: Bloomberg, returns in USD)
*Iran is currently not investable due to US sanctions




Exports recover for Bangladesh, Pakistan and Sri Lanka

While Vietnam continued to manage stability in its exports even after the pandemic struck, Bangladesh, Pakistan and Sri Lanka witnessed a significant drop in exports especially in April as lockdowns not only in these countries but also globally led to very little exports to their key export markets, namely the U.S. and Europe. As global lockdowns have been lifted, all three countries have seen a big uptick in exports over the past few months with their July export numbers going ahead of their pre-pandemic levels of January 2020.



(Source: Topline Securities, CT CLSA Securities, Bangladesh Export Promotion Bureau. Rebased to 100)


AFC Uzbekistan Fund gained 6.7% in August

The performance of the AFC Asia Frontier Fund was also helped by the 7% gain in the AFC Uzbekistan Fund which has now returned +1.3% for the year despite the global volatility. Valuations remain extremely attractive with the AFC Uzbekistan Fund trading at a P/E of 3.8x.

AFC participates in the AIBC 2020

For the third year running we participated in the Asia Investment & Banking Conference organised by the London School of Economics. Ruchir Desai, co-manager of the AFC Asia Frontier Fund represented Asia Frontier Capital on the asset management panel. This time around the forum was held online given the circumstances. Please click on the banner below for further details.





AFC will present at the CFA Society of Hong Kong

On 6th October 2020, Ruchir Desai, co-manager of the AFC Asia Frontier Fund will be presenting in an online forum organised by the CFA Society of Hong Kong. The forum called “The Future of Asian Frontier Markets” will focus on the impact, the outlook, and the potential gainers in a post-COVID-19 world. Some of the key questions which the presentation will focus on are:

  • What has been the economic and social impact of COVID-19 on Asian frontier markets?
  • What is the economic outlook for Asian frontier markets post-pandemic?
  • What about the debt levels and fiscal deficits in some Asian frontier markets?
  • Which countries could be the key long-term winners due to the supply chain and geopolitical shifts brought about by the impact of COVID-19?
  • Why Asian frontier markets and not other frontier markets?

If you would like to attend, feel free to register for the event using the link below as the forum is open to all.

Click here to register for the 6th October event “The Future of Asian Frontier Markets”:



Below please find the manager comments relating to each of our four funds for the month of January 2020.

If you have any questions about our funds or would like to receive additional information, please be in touch with our team at This email address is being protected from spambots. You need JavaScript enabled to view it. .

 Back To Top 



Upcoming AFC Travel

Thomas Hugger, Ruchir Desai, and Peter de Vries are based in Hong Kong, while Andreas Vogelsanger is based in Bangkok 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. .




Baghdad, Iraq   13th – 30th September   Ahmed Tabaqchali
Zurich, Zug, Switzerland   15th – 16th September   Thomas Hugger
 Back To Top 



AFC Vietnam Fund - Manager Comment


The AFC Vietnam Fund gained 8.6% in August with a NAV of USD 1,774.14, bringing the return since inception to +77.4%. This represents an annualized return of +8.9% p.a. The Ho Chi Minh City VN Index in USD rose 10.4%, while the Hanoi VH Index gained 16.1% (in USD terms) in August 2020. The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.52%, a Sharpe ratio of 0.63, and a low correlation of the fund versus the MSCI World Index USD of 0.57, all based on monthly observations.

Markets in Vietnam were finally able to show strong gains after the government successfully contained the virus outbreak of July. While the lockdown in the epidemic hotspot Danang is still in place, new community infections are trending back toward zero. Optimism about the overall economy led to a rise in the indices in Ho Chi Minh City and Hanoi of 10.4% and 16.1% respectively, with small- and mid-cap stocks recovering strongly as well. The fund’s holdings were mostly up strongly for the month.

Market Developments

As was the case in the past two months, the first two weeks of August saw good index gains. But unlike in June and July, the stock market finally continued its positive trend, finishing the month with healthy gains. Banks were the driving force behind the gains with some rising more than 20%, but the upward move was also supported by other sectors, although volume picked up only in the last week. So far, the market has not been able to climb back to its January 2020 level, but is back where it was six months ago – we have to remember that this was just before global financial markets collapsed in response to COVID-19, a time when only 90,000 cases were registered worldwide (currently more than 25 mln). Once again, locals dominated the market while foreigners remained net sellers.


VN-Index 6 months and Market Breath which is turning positive

(Source: Bloomberg)


COVID-19 update

The second wave of infections in Vietnam which started just before the end of July caused understandable anxiety among investors. But the immediate and decisive government actions, as seen in the epicentre of the outbreak, Danang and its neighbouring province, Quang Nam, included a full lockdown for the whole city of Danang until now. This delivered confidence to Vietnamese and foreign investors that the government will once again be able to control the pandemic successfully. Testing and contact tracing have intensified with 57,000 people being medically monitored and quarantined, including 1,100 at hospitals, 16,000 in centralized quarantine camps, and the rest at their places of residence. As a result of the new wave of community-driven infections in the Danang region, the country registered a total of 1,040 infections and 32 deaths up to the morning of 31st August 2020.

Vietnam among the most attractive risk/reward profiles in the world

Whenever people (especially men) see bars with “all you can drink” campaigns, they get excited and want to participate. The same can be said right now about central banks announcing the equivalent of “free money for all” since the outbreak of the pandemic. The result from this is best seen in the US stock market and particularly in a smaller number of US tech stocks. Western Central Banks’ debasement of their currencies has certainly helped other markets as well, but so far only to a lesser extent in Asian emerging markets. Limited financial resources of their governments and a completely different approach to opening (or more accurately “not opening”) their countries again to the world might best explain why this part of the world was an economic victim of its own success fighting the pandemic. Interestingly enough, the majority of the Asian population supports the closure of their countries in what seems to almost be a COVID-19 paranoia, while at the same time the rest of the world tried to restart their economies by opening up - with mixed success and a resurgence of infection rates, albeit with a much lower death toll than in the first wave.


Index performance since the start of the year for China/USA/Europe/Vietnam/Thailand

(Source: Bloomberg)


Index P/E’s since the start of the year for China/USA/Europe/Vietnam/Thailand

(Source: Bloomberg)


As a consequence of the resurgence of greed in financial markets, US stock market valuations for example are currently far away from tracking the real economy. In Europe, investors were also expecting - or hoping - for a “V”-shaped recovery but with the momentum of economic activity running out of steam, this seems to be challenging.

On the other hand, the economy in Vietnam is doing much better than many other nations, with main economic drivers such as the export sector already showing growth again, while most other countries are facing sharply lower trade figures. In its latest meeting in July, the government also considered public investment disbursement as a key solution to an economic recovery amid the COVID-19 pandemic. The government established seven delegations led by the prime minister, deputy prime minister and various other ministers to conduct workshops with local business and political leaders over the past five weeks. The government reiterated its aim to disburse around USD 27 bln through economic support packages for infrastructure projects this year, such as the North-South Expressway, Long Thành International Airport, and Mỹ Thuận-Cần Thơ Expressway. 

Vietnam looks markedly undervalued relative to other markets – both in terms of relative and absolute valuation – especially when taking into consideration its stable currency versus the USD, an expected positive 2020 GDP growth number and continued inflow of foreign direct investments into various sectors.


2019/2020 Export Numbers (USD bln)

(Source: GSO, AFC Research)


Vietnamese real estate market after the pandemic

As with many other sectors, the Vietnamese real estate market was impacted by the pandemic. In April, the Vietnamese government introduced a social distancing policy in order to limit the spread of COVID-19. This had an impact on the number of traded properties in Vietnam, which declined sharply, since most people stayed at home. However, after Vietnam managed to successfully control the first wave of COVID-19 infections, the real estate market started to recover strongly. According to one of the largest real estate brokers in Ho Chi Minh City, Danh Khoi Real Estate JSC, the number of transactions for apartments in Ho Chi Minh City in 2Q 2020 jumped 54% to 2,430 units, compared to Q1 2020. Also, the Q2 2020 number of transacted houses/villas in HCMC increased by 42% compared to 1Q 2020. But despite this strong recovery, if we compare these Q2 2020 numbers to the same period one year ago, then we clearly see that we are still far away from previous levels, with transaction numbers down around 64%. This mainly has to do with the impact of COVID-19, such as social distancing rules, but also the lack of supply of new apartments and houses, since the pandemic slowed the construction progress of many projects in the city. Furthermore, the impact of Vietnam’s anti-corruption campaign on the real estate sector has delayed the licensing process for many property projects. 

Similar to the stock market, foreigners play only a minor role in the real estate market. Currently, they own just around 16,000 apartments in Vietnam, or 2 percent of the total housing supply, which has not affected local people's opportunity to buy houses. Given the population of nearly 100 mln, 16,000 apartments is a negligible number in a market like Vietnam. 

From 2015 to 2020, 17 major real estate developers which include popular names like Vingroup, Novaland and Phu My Hung have sold around 12,000 property units to foreigners, 81 per cent of them in Ho Chi Minh City, according to a report by the Ho Chi Minh City Real Estate Association. 


Property units sold to foreigners 2015-2010

(Source: Ho Chi Minh City Real Estate Association, VnExpress)


Outlook and consumer behaviour 

We are now seeing real estate developers actively market their new projects and it seems that investors are starting to show interest again. It is interesting to note that despite COVID-19, apartment prices are stable or even slightly higher and land prices in certain areas near HCMC have nearly doubled compared to one year ago. For example, land prices in Dong Tang Long area in District 9, Ho Chi Minh City, increased from around USD 1,000 - USD 1,200 per square meter at the end of 2019 to USD 1,800 - USD 2,000 per square meter! When we talked to a senior real estate broker with more than 15 years of experience, he explained to us this sharp price increase is due to the following: 

  • Vincom Group, the largest and most influential real estate developer in Vietnam, is pricing the land at their Vinhome Grand Park project near Dong Tang Long (around 25km from the city centre of HCMC) at USD 3,500 to USD 4,000/sqm.
  • Land supply for residential real estate projects near HCMC is very limited. Most developers therefore rush to secure as much land reserves as they can get and hence push prices up sharply, even in suburban areas such as District 9, District Thu Duc, or Nhon Trach District in Dong Nai Province are feeling this impact.  
  • Due to the pandemic, the consumer behaviour of high net worth buyers has changed, and they are now looking to buy larger land plots to build their own villas, rather than buying luxury apartments, where population density is high.
  • The average bank lending interest rate became much more attractive with current rates around 8-9% from 11-12% last year.

Vinhome Grand Park Project

(Source: Vinhome)


According to a recent survey by one of the most popular websites in Vietnam,, real estate is the first choice of investors in Vietnam, followed by bank deposits, gold, stocks and local VND-cash as well as USD. Because Vietnamese citizens have experienced waves of very high inflation in the past, USD has always been seen as an investment class on its own for Vietnamese for parking money in the short term. It therefore seems that the demand for real estate is bound to increase over the foreseeable future.


Survey by (what will you invest in during COVID-19?)

(Source: VnExpress)


A lot of Vietnamese people believe that “land prices never fall”, they just go up over time! Therefore, many people in the emerging middle class have a mission which is to buy some land or an apartment as soon as they can afford it. But also, the demand of foreign buyers for apartments in Ho Chi Minh City has increased sharply over the past few years. According to a survey of PwC, Ho Chi Minh City ranks number 1 among Asian Cities in terms of buying residential assets. 


Residential assets Buy – Hold – Sell Recommendations for 2020 by City

(Source: Emerging trends in real estate Asia Pacific 2020 by PWC and the Urban Land Institute)


We believe that the real estate sector looks attractive, especially key real estate developers with large land banks and strong financial power which will benefit the most in a booming economy over the years to come. 


Land reserves in 2019 by listed real estate company (hectares)

(Source: cafef, AFC research, companies’ annual reports)


At the end of August 2020, the fund’s largest positions were: Agriculture Bank Insurance JSC (7.3%) – an insurance company, Vietnam Container Shipping JSC (5.4%) – a container port management company, LienViet Post Joint Stock Commercial Bank (3.7%) – a bank, TanCang Logistics and Stevedoring JSC (3.3%) – a logistics company, and Pharmedic Pharmaceutical Medicinal JSC (3.1) – a pharmaceutical company.

The portfolio was invested in 47 names and held 15.4% in cash. The sectors with the largest allocation of assets were industrials (29.1%) and consumer goods (24.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.31x, the estimated weighted harmonic average P/B ratio was 0.95x and the estimated weighted average portfolio dividend yield was 6.67%

 Back To Top 



AFC Uzbekistan Fund - Manager Comment



The AFC Uzbekistan Fund Class F shares returned +6.7% in August with a NAV of USD 1,107.91, bringing the return since inception (29th March 2019) to +10.8%, and the Year to Date return to +1.3%.

August saw broad-based price appreciation amongst the fund’s holdings as the Tashkent Stock Exchange continues to mature and attract new market participants.

AFC Uzbekistan Fund valuations as of 31st August 2020:

Estimated weighted harmonic average trailing P/E (only companies with profit):


Estimated weighted harmonic average P/B:


Estimated weighted portfolio dividend yield:



Market depth and liquidity continue to mature

August was quiet on the macro news front with no notable events. However, the broad-based rally among the fund’s holdings continued, from consumer goods to materials and financial services, and new market participants entered the market as the competition to accumulate quality companies at attractive valuations continued while liquidity increased. This is in line with our thesis for how an eventual broad-based re-rating across the stock market and broader economy should unfold.

The fund's largest holding, Qizilqum Cement (TSE: QZSM), saw continued strength and accumulation during August with its share price rising 16.6% for the month. QZSM’s share price has continued its multi-month price rise as the company continues to benefit from strong cement prices and a deficit of supply in the local market. During the last week of August there were rumours of the company possibly announcing a dividend for FY 2019 at its annual general meeting which will be held on 19th September. If QZSM was to pay a dividend similar to other state-owned companies, the payout ratio could be as high as 85%, which equates to a dividend yield of 21.3% as of 31st August. Regardless of whether dividends are paid, QZSM’s share price is in an uptrend as it sees increasing accumulation by new market participants. This has led the share price to appreciate by 52.7% year to date.

The other significant market news during the month was the 3:1 share split for the Uzbek Commodity Exchange (TSE: URTS). The share split was meant to occur in the third quarter of 2019, in preparation for the government’s privatization of 12% of the company to minority investors. It has finally happened, albeit with a delay. For the month of August, URTS’s share price rose 50%, attributable to the share split and ensuing increase in liquidity. The price action as a result of the share split is further confirmation that as liquidity in high quality listed companies increases, re-ratings in their prices and valuations should be expected in due course. 

Hopefully, this is only the beginning of a consistent and prolonged trend of enhanced liquidity and new market participation which creates a positive feedback loop, accelerating the re-rating we are expecting. No doubt, one of the key contributors to this will be an increase in liquidity throughout the broader economy which is likely to be led by foreign inflows into the financial system. This will lower the cost of capital and enable consumers and corporations alike to leverage their balance sheets, a trend that occurs in most early-stage economies and which should see accelerated inflows into listed equities.


Uzbek Commodity Exchange

(Source: Asia Frontier Capital)


AFC Uzbekistan Investor Tour Update

Due to the ongoing challenges with international travel, the investor tour we had originally planned for May 2020 and then postponed to October 2020 is further postponed tentatively to May 2021 assuming international travel regains a semblance of normalcy and ease. We will provide an update on the situation and plans for the tour during the first quarter of 2021.

At the end of August 2020, the fund was invested in 28 names and held 3.7% in cash. The markets with the largest asset allocation were Uzbekistan (94.2%) and Kyrgyzstan (2.1%). The sectors with the largest allocation of assets were materials (59.9%) and industrials (16.0%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 3.75x, the estimated weighted harmonic average P/B ratio was 0.73x and the estimated weighted average portfolio dividend yield was 5.87%.

 Back To Top 



AFC Asia Frontier Fund - Manager Comment


The AFC Asia Frontier Fund (AAFF) USD A-shares increased by 4.3% in August 2020 with a NAV of USD 1,221.99. The fund underperformed the AFC Frontier Asia Adjusted Index (+7.3%), the MSCI Frontier Markets Asia Net Total Return USD Index (+9.6%), the MSCI Frontier Markets Net Total Return USD Index (+8.2%) and the MSCI World Net Total Return USD Index (+6.7%). The performance of the AFC Asia Frontier Fund A-shares since inception on 31st March 2012 now stands at +22.2% versus the AFC Frontier Asia Adjusted Index, which is up by +3.0% during the same time period. The broad diversification of the fund’s portfolio has resulted in lower risk with an annualised volatility of 10.60% and a correlation of the fund versus the MSCI World Net Total Return USD Index of 0.51, all based on monthly observations since inception.

The fund’s gain of 4.3% this month takes the return since the bottom in March 2020 to +19.8%. Returns this month were led by Bangladesh, Vietnam and Sri Lanka while the detractors were a few mining stocks from Mongolia which corrected after witnessing very strong rallies over the last few months.

Bangladesh was the top performing market globally in August with the Dhaka Stock Exchange Broad Index gaining 15.8% as the domestic economy has reopened post lockdown and the country saw a big recovery in exports after taking a hit in April due to global lockdowns. Additionally, interest rate cuts by the Central Bank are leading domestic investors to return to equity markets which has also added to the liquidity-led rally.

Beximco Pharmaceuticals was the biggest contributor to the fund’s positive performance as its GDR which the fund holds gained +33.3% on the back of the company’s announcement that it would be partnering with the Serum Institute of India to gain exclusive supply of a COVID-19 vaccine for Bangladesh.

The Serum Institute of India is the largest vaccine producer globally and is one of the partners with AstraZeneca which is developing a COVID-19 vaccine. This is another positive for Beximco Pharmaceuticals in addition to it becoming the first company globally to produce the generic version of the COVID-19 drug Remdesivir. Other major gainers for the fund in Bangladesh were a bank, a consumer staples company and a consumer electronics retailer which gained 24.5%, 18.5% and 13.3% during the month respectively.

The Bangladeshi manufacturing sector made further strides with Samsung (which began manufacturing operations in the country in 2018) beginning production of its latest Galaxy Note20 smartphone at its Bangladeshi plant located outside the capital, Dhaka. This is another positive for the country as pharmaceutical and consumer electronics manufacturing will help in diversifying the country’s reliance on the garment sector.


Beximco Pharmaceuticals outperforming the Bangladesh DSE Broad Index on the back of new product launches and higher than peer earnings growth

(Source: Bloomberg, % change in price from 31st December 2019 – 31st August 2020)


The second wave of COVID-19 also subsided this month in Vietnam which led to a 10.4% gain for the Ho Chi Minh VN Index, taking the index back to levels seen before the first cases of the second wave hit at the end of July. However, in this rally mid cap stocks outperformed with the VN Mid Cap Index gaining 12.6% this month.

The fund’s Vietnamese holdings are a mix of both mid cap and large cap names. The fund’s large cap names outperformed the VN-Index in the rally seen in April and May 2020 while this month the majority of the fund’s mid cap positions outperformed the VN Index with a transportation company and a construction contractor gaining 24.1% and 17.9% respectively, while in the large cap space the fund’s beverage holding gained 14.0%.

The fund’s modern retail exposure, Vincom Retail, continues to attract important foreign brands with Uniqlo, the Japanese apparel retailer, opening a 2,000 square meter store at another Vincom Retail mall in Hanoi, taking its store count to a total of two Vincom Retail malls in Hanoi and one in Ho Chi Minh City. Due to its ability to set up malls in attractive locations as well as its scale with a gross floor area of 1.6 mln square meters, making it the largest mall operator in Vietnam, Vincom Retail’s malls have been able to attract key international brands like H&M, Zara, Nike, Starbucks, Decathlon and Haidilao, among others. Though the country-wide lockdown impacted footfalls in April 2020, as at the end of the second quarter its footfalls in Hanoi and Ho Chi Minh City malls were back to 95% and 75% of pre-lockdown levels.


Mid cap stocks in Vietnam outperformed large caps in August

(Source: Bloomberg)


Shoppers line up outside a newly opened Uniqlo store at a Vincom Retail mall in Hanoi earlier this March

(Source: Báo Lao động Thủ đô)



(Source: Central Pattana)


Market sentiment in Sri Lanka remained positive on the back of a comprehensive win for the Rajapaksa led SLPP (Sri Lanka Podujana Peramuna) in the parliamentary elections held on 5th August 2020. The 4.0% gain for the CSEALL Index led to an overall rally in the fund’s Sri Lankan holdings but a latex glove manufacturer and a diversified conglomerate which the fund holds outperformed the broader index by a large margin, gaining 32.9% and 22.4% respectively.

A Sri Lankan consumer conglomerate which the fund holds announced the acquisition of the leading confectionary company in Sri Lanka which further strengthens its position in the consumer sector. This consumer conglomerate trades at a P/E of 6.5x and showed a small gain of 2.3% this year compared to a decline of 13.1% for the Colombo CSEALL Index. This reflects the value available in Sri Lankan blue chip stocks at the moment.

As the lockdown has eased in Pakistan, economic momentum continues to pick up which is reflected in passenger car sales which have reverted back to pre-lockdown levels. Lower interest rates and new product launches have led to this recovery in passenger car sales with new launches from Toyota and Kia seeing an extremely strong response from buyers. On the pandemic front, the infection curve in Pakistan continues to flatten and active cases have dropped significantly from their peak in June – this bodes well for the economic recovery in Pakistan.



(Source: IMS Securities)



(Source: Bloomberg)


The best performing indexes in the AAFF universe in August were Bangladesh (+15.8%) and Vietnam (+10.4%). The poorest performing markets were Cambodia (−2.1%) and Laos (−1.3%). The top-performing portfolio stocks this month were a Bangladeshi pharmaceutical company (+33.3%), a Sri Lankan latex glove manufacturer (+32.9%), a Bangladeshi bank (+24.5%), a Vietnamese transportation company (+24.1%), and a diversified Sri Lankan conglomerate (+22.4%).

In August, the fund bought a Cambodian casino operator and added to existing positions in Mongolia and Vietnam and partially exited holdings in Mongolia.

At the end of August 2020, the portfolio was invested in 74 companies, 2 funds and held 4.7% in cash. The two biggest stock positions were a pump manufacturer from Vietnam (10.6%), and a pharmaceutical company in Bangladesh (4.5%). The countries with the largest asset allocation were Mongolia (19.3%), Vietnam (18.6%), and Bangladesh (11.0%). The sectors with the largest allocation of assets were consumer goods (25.7%) and industrials (16.8%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.80x, the estimated weighted harmonic average P/B ratio was 0.85x and the estimated weighted average portfolio dividend yield was 3.63%.

 Back To Top 




The AFC Iraq Fund Class D shares returned +2.5% in August with a NAV of USD 607.07 versus its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which returned +3.7% for the month. Year to date the RSISUSD was down 2.9% while the fund lost 3.2%.

The subdued “dog days of summer” were further subdued this year as the month of August was shortened by an Eid holiday that rolled into an extended lockdown at its start, and the beginning of the annual 40-day Arbaeen pilgrimage at month-end.

The Rabee Securities RSISX USD Index (RSISUSD) rose 3.8% during August’s 12 trading days, and is up 30.6% from the multi-year lows in April 2020. The fund was up 2.5% for the month, is up 30.8% from the April 2020 low, and is down 3.2% for the year.

The market’s daily turnover continued to gradually increase after the declines following the lockdown starting in March – an increase encouraged by the market’s better tone since then (chart below). Banks, which led the market’s recovery, were mostly flat in August, after their recent strong performances, and will likely experience some profit-taking during September given the expected slowdown in activity coinciding with the Arbaeen pilgrimage which finishes in the first week of October. While the pilgrimage will likely be more low-key than normal this year, given social distancing rules, early reports on the activities of pilgrims are mixed on the adherence to these rules.



(Source: Iraq Stock Exchange, Asia Frontier Capital, data as of 31st August)


The Iraq Stock Exchange (ISX) continued with its investors’ Zoom conference calls initiative in which ISX-listed companies discuss their recent earnings results and outlook for the year. Among the leading companies recently presenting were Pepsi bottler Baghdad Soft Drinks (IBSD) in late July, mobile operator AsiaCell Communications (TASC) and Commercial Bank of Iraq (BCOI) both in August. The initiative, a first for the ISX and its listed companies, has been promising in increasing investor understanding of the companies, their business plans, and outlooks – especially taking into account the effects of the disruptions to economic activities post-lockdown. This is a welcome development that is vastly different from the usual dearth of meaningful information beyond the annual reports and spartan quarterly reports which has traditionally led to rumours filling the information vacuum. The ISX intends to continue this initiative over the coming quarters and for the ISX-listed companies to proactively engage with investors.

Economic activity this summer seems to have mostly returned to pre-lockdown levels as can be seen from the Google mobility chart below. Encouragingly, this happened even after taking into account the effects of two Eid holidays in which each holiday was bundled into a 10-day lockdown, and the recent rolling Thursday-Saturday lockdowns which cut the working week to four days from five.



(Baseline is the median, for the corresponding day of the week, during 3rd January – 6th February, Source: Google, data as of 28th August.)


This recovery in activity built up gradually over the last few weeks as can be seen above, and it would have likely contributed to the healing of the economy from the shock brought about by the lockdown. However, it should be noted that the decline in activity as a result of the initial lockdown in March-May would have likely been more precipitous than shown in the above chart as activity in the retail, transport and hospitality sectors was subdued during the baseline period given the chilling effects of the dramatic events at the beginning of the year. More so, these events came on the back of a slowdown induced by the continued countrywide demonstrations since October 2019. Nevertheless, the recovery in economic activity is a positive development should it be sustained.

While there isn’t any new economic data that might provide a fuller picture, the decline from 4.8% to 3.1% in the premium of the market price over the official price of the Iraqi Dinar (IQD) versus the USD is a positive added to the mobility data above – even though the current premium is much higher than the 1.2% that it averaged in 2019. Moreover, it is too early to conclude whether the decline is due to an easing of the flight to safety, i.e. the hoarding of the USD, or, if it’s due to weak demand for imports. The latter is an important indication of economic activity and consumer confidence given the high dependence on imports to satisfy consumer demand.



(Source: Central Bank of Iraq, Iraqi Foreign Exchange Houses, Asia Frontier Capital, data from 1st January to 28th August)


The market’s recovery over the last four months notwithstanding, arguably, the claim made here in May still stands that the ’worst-case’ prognosis for Iraq in the wake of the carnage brought about by COVID-19 will not be as bad as originally feared, however the market continues to price it in.


As of the end of August 2020, the AFC Iraq Fund was invested in 14 names and held 6.5% in cash. 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 (91.9%), Norway (1.1%), and the UK (0.5%). The sectors with the largest allocation of assets were financials (51.4%) and communications (18.0%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 14.03x, the estimated weighted harmonic average P/B ratio was 0.63x and the estimated weighted average portfolio dividend yield was 5.61%.

 Back To Top 



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.



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 representative of the Funds in Switzerland is ACOLIN Fund Services AG, succursale Geneve, 6 Cours de Rive, 1204 Geneva. 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.

AFC Asia Frontier Fund is registered for sale to qualified/professional investors in Japan, Singapore, Switzerland, the United Kingdom, and the United States. AFC Iraq Fund and AFC Uzbekistan Fund in Singapore, Switzerland, the United Kingdom, and the United States. AFC Vietnam Fund in Japan, Singapore, Switzerland, and the United Kingdom. 

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.

© Asia Frontier Capital Ltd. All rights reserved.

 Back To Top 



 You can update your preferences or unsubscribe. 
 Powered by Lianamailer