“Mediocrity knows nothing higher than itself, but talent instantly recognizes genius.”

– Sir Arthur Conan Doyle – British writer and physician

AFC Funds Performance Summary

AFC Iraq Fund and AFC Asia Frontier Fund Outperform Global Markets in April 2024

Despite a very weak and negative month for most global markets, our AFC Iraq Fund and AFC Asia Frontier Fund bucked the trend with strong monthly gains of +14.2% and +3.8%, respectively. The performance by both funds so far in 2024 signifies the stock market and economic recovery taking place across most key Asian frontier countries, while some other regions in the world are still grappling with an uneven macroeconomic recovery.

Key Asian frontier stock markets have seen a continuation in momentum in 2024, with Iraq, Kazakhstan, Pakistan, and Sri Lanka among the top-performing markets globally. Furthermore, Asian frontier markets continue their outperformance against other regional markets in Asia, which is also a signal to investors that they should have exposure to Asian frontier markets, which have delivered a robust performance in the last few years, unlike some other well-researched markets in Asia.

Asian Frontier Markets Continue their Momentum and Outperformance Against Asian Peers in 2024
(Year to Date Returns in USD)

AFC Quarterly Webinar was Conducted on 25^th April 2024

Our AFC Quarterly Webinar was successfully held on 25^th April 2024 and was well attended by our existing and potential investors, who posted some great questions as usual. Unfortunately, there wasn’t enough time to answer all the questions, and therefore, we decided to extend the Q&A from 15 minutes to a maximum of 30 minutes going forward. The key message from the webinar is that Asian frontier markets are well placed to maintain the momentum they have seen so far in 2024, with key positive triggers still playing out in the form of monetary easing, macro and earnings recovery and discounted valuations.

You can click the links below to replay the webinar or view the presentation.

May 2024 Subscription Cut-Off Date

The next cut-off date for subscriptions for our funds will be 27^th May 2024. 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 April 2024.

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 Iraq Fund - Manager Comment

The AFC Iraq Fund Class D shares returned +14.2% in April 2024 with a NAV of USD 1,707.68, underperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which gained 17.8% during the month. The fund was up 19.4% year to date versus up 16.6% for the index. Since inception, the fund has gained 70.8% while the RSISUSD index is up by 20.8%, an outperformance of 50.0%.

The much-feared widening of the current Middle East conflict became a reality at the start of the month with the alleged Israeli attack on the Iranian Embassy Complex in Syria on 1^st April 2024. Iranian vows to retaliate sparked fears of a violent escalation of the tensions that were simmering over the last few months. However, Iraq’s stock market rallied on the event and continued to rally despite the realisations of these fears with Iran’s attack on Israel on 13^th April 2024 and Israel’s alleged attack on Iran on 19^th April 2024 – the RSISX USD Index’s increase for the month peaked at 21.1% before profit taking pared some of these gains as the month came to an end. As discussed here recently in “Markets Continue to Look Through Tensions” and prior to that in “Assessing the Risks of a Wider Middle East Conflict”, the Iraqi stock market is discounting the developments that were driving the transformation of the economy, and that were already in place prior to the onset of the conflict in early October 2023, and that it has discounted, and continues to discount, a contained conflict. These were discussed in the market outlook for 2024 in “What Next after a Gangbuster Year ???” with the strong net profit results for 2023 for the top-quality banks in the country reflecting these very same developments that would drive the transformation of the economy by accelerating the adoption of banking and bringing about a transformation of the sector and its role in the economy. 

The AFC Iraq Fund’s presentation in Asia Frontier Capital’s quarterly webinar on 25^th April 2024, available here, discussed the markets’ response to this widening of the Middle East conflict, as  expressed by the Iraqi stock market, Iraq’s currency market, and global oil prices. Firstly, the RSISX USD Index is up 27.2% from just before the start of the conflict to 30^th April 2024 - in particular, it is up 2.6% since Israel’s alleged attack on Iran and up 9.8% since the earlier Iranian attack on Israel (chart below).

Rabee Securities U.S. Dollar Equity Index

Secondly, the currency market, similarly to the stock market, was discounting the same dynamics that were driving the transformation of the economy, and that were already in place prior to the onset of the conflict in early October 2023. Specifically, for the currency market, these were initiated by the Central Bank of Iraq’s (CBI) latest procedural requirements for its provisioning of U.S. dollars for cross-border transfers introduced in mid-November 2022, which led to a dollar supply-demand mismatch and consequently to the depreciation of the parallel market price of the Iraqi dinar versus the dollar. After bottoming in early November 2023, the parallel market price of the Iraqi dinar versus the dollar appreciated by 12.4% by the end of April 2024 (chart below).

Dinar Parallel Market Exchange Rate Versus the Dollar

Thirdly, current oil market expectations, as measured by Brent crude futures contracts as of 30^th April 2024 (orange line-chart below), are near the top of a range bound on the upper end by expectations of supply fears following the invasion of Ukraine (red line-chart below), and on the lower end by those at the end of 2021 (grey line-chart below). Thus, while higher than what they were in the last few months, oil market expectations are nevertheless still discounting a contained conflict. Iraq’s extreme leverage to oil prices would translate to more fuel for the government’s expansionary budget should these expectations remain at these elevated levels.

Market Expectations for Future Oil Prices
As Measured by Brent Futures Contacts (USD Per Barrel)

In conclusion, we believe that the upside opportunity for the AFC Iraq will come about as the RSISX USD Index, which by the close of the month is 13.9% below its 2014 peak, regains that peak and rallies substantially further driven mostly by the fundamental developments discussed here in the last few months. However, risks remain given Iraq’s recent history of conflict, extreme leverage to volatile oil prices, as well as the risks that the widening of current Middle East conflict will not be contained and evolve to destabilise the region.

At the end of April 2024, the AFC Iraq Fund was invested in 8 names and had a cash level of 9.0%. 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 (89.7%), Norway (1.1%), and the U.K. (0.2%).

The sectors with the largest allocation of assets were financials (74.7%) and consumer staples (10.1%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.29x, the estimated weighted harmonic average P/B ratio was 1.79x, and the estimated weighted average portfolio dividend yield was 4.22%. 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 +3.8% in April 2024 with a NAV of USD 1,687.84. The fund outperformed the benchmark MSCI Frontier Markets Asia Net Total Return USD Index (−7.0%), the MSCI World Net Total Return USD Index (−3.7%) and the MSCI Frontier Markets Net Total Return USD Index (−3.0%). Year-to-date, the fund shows a +8.7% return versus the benchmark, which is down by 1.1%. The performance of the AFC Asia Frontier Fund A-shares since inception on 30^th March 2012 now stands at +68.8% versus the benchmark, which is down by 24.5% during the same period, showing an outperformance of +93.3% since inception. The fund’s annualized performance since inception is +4.4%. The broad diversification of the fund’s portfolio has resulted in lower risk with an annualised volatility of 10.6% 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.

It was again a solid month for the AFC Asia Frontier Fund despite global markets being highly volatile in April. The strong +3.8% gain for the fund during the month while all major global indexes posted negative returns only signifies the advantages of investing in the AFC Asia Frontier Fund, which offers a lower correlation to global markets.

Returns in April were again broad-based, with gains led by Iraq, Mongolia, Sri Lanka, Pakistan, Cambodia, and Georgia. Negative performance contributors during the month were Bangladesh, Vietnam, Kazakhstan, and Uzbekistan.

Results season is in full swing, with many companies in our universe declaring 1Q24 results. The fund’s biggest stock position, Kaspi, a fintech super app company from Kazakhstan, declared another strong quarter with net profits in 1Q24 growing by +28%. 

The continued momentum in net profit growth is a reflection of the strong execution by the management team in growing both its existing and new businesses. With robust earnings growth, Kaspi’s valuation remains very attractive at an estimated 2024 P/E ratio of only 9.4x.

Kaspi Super App Consumer Interactions Higher than Most Global Peers 
(Ratio of Daily Active Users / Monthly Active Users)

The fund’s two largest positions in Vietnam, the technology company FPT Corp. (FPT) and the port operator Gemadept (GMD), declared excellent 1Q24 results, with net profits growing by 20% and 49% respectively. Both companies have declared very good results over the past few quarters due to their competitive advantages in their respective industries. 

Elaborating on this point, during the month, FPT announced the signing of a comprehensive strategic partnership with NVIDIA to offer AI-based products and services to FPT customers globally, and this shows the strides FPT is making in the global technology market, which is helping to sustain its strong earnings growth.

Our holdings in FPT and GMD are also a reflection of our focus on investing in quality companies that can generate consistent shareholder returns. Both stocks have significantly outperformed the VN-Index in the past year despite overall weak investor sentiment in Vietnam.

FPT and GMD – the AFC Asia Frontier Fund’s Two Largest Positions in Vietnam have Outperformed the VN-Index as Strong Earnings Come Through

The fund’s two biggest positions in Bangladesh, Beximco Pharmaceuticals and Square Pharmaceuticals, also declared good results, with 1Q24 net profits growing by 44% and 15% respectively. After a tough few quarters for both companies due to pressure on sales growth after COVID-19 and higher input costs, earnings are now recovering as selling prices of products increase and input costs stabilise. Valuations for Beximco Pharmaceuticals and Square Pharmaceuticals remain extremely attractive, with P/E ratios of 9.8x and 9.1x respectively. 

In Sri Lanka, with a strong stock market rally underway, our bank holdings have done very well as this sector re-rates not only due to very attractive valuations but also because of the prospects for higher loan growth and potential provision write-backs as Sri Lanka’s economy follows through with a recovery. 

Sri Lankan banks went through a difficult time in the past few years but we now feel that they have turned the corner and should see much improved fundamentals over the next few years. The fund holds Commercial Bank of Ceylon (our largest position in Sri Lanka) and Hatton National Bank, both of which have significantly outperformed the Colombo All Share Index in the past year.

AFC Asia Frontier Fund’s Sri Lankan Bank Holdings Have Outperformed the Colombo Index with the Sri Lankan Economy Turning Around

The best-performing indexes in the AAFF universe in April were Iraq (+17.8%) and Sri Lanka (+8.0%). The poorest-performing markets were Cambodia (−10.2%) and Laos (−8.4%). The top-performing portfolio stocks this month were a Mongolian stock exchange operator (+41.1%), a Mongolian convenience store chain (+31.2%), a Pakistani consumer healthcare company (+24.0%), a Mongolian junior copper miner (+22.2%), and a Cambodian gold mining company (+20.8%).

In April, the fund purchased a gold producer in Mongolia and added to existing positions in Bangladesh, Mongolia, Pakistan, Sri Lanka, and Vietnam and reduced existing positions in Mongolia and Vietnam.

At the end of April 2024, the portfolio was invested in 66 companies, 2 funds, and held 8.1% in cash. The two biggest stock positions were a fintech company in Kazakhstan (4.5%) and a bank in Kazakhstan (4.1%). The countries with the largest asset allocation were Vietnam (13.5%), Iraq (13.0%), and Mongolia (11.4%). The sectors with the largest allocation of assets were financials (32.0%) and consumer goods (20.8%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.17x, the estimated weighted harmonic average P/B ratio was 1.31x, and the estimated weighted average portfolio dividend yield was 2.77%. The fund’s portfolio carbon footprint is 0.59 tons per USD 1 mn invested.

AFC Uzbekistan Fund - Manager Comment

The AFC Uzbekistan Fund Class F shares returned −1.0% in April 2024 with a NAV of USD 1,573.09, bringing the return since inception (29^th March 2019) to +57.3%, while the return for the year stands at −9.5%. On an annualised basis, the fund has returned +9.3% p.a. with a Sharpe ratio of 0.52.

April saw a continued number of announcements from Chinese investors as well as an announced plan for a more well thought out privatisation programme, though we expect it to have little success in advancing aggressively until the capital markets legislation we have talked about in previous letters is updated, and capital markets infrastructure is upgraded. The market was quiet coming out of the Ramadan-shortened month, however, the companies held by the AFC Uzbekistan Fund continue to perform strongly.

Capital Markets Update

During April, the government announced a revised program for privatisation of state-owned enterprises (“SOEs”) just as the government kicks off the Tashkent Investment Forum from May 2^nd and 3^rd 2024. However, as we have witnessed several of the government’s attempts at privatisation of SOEs through the Tashkent Stock Exchange, we will wait to comment more on the process until the infrastructure for the exchange is upgraded, as this is the lynchpin holding back the next phase of the markets’ re-rating.

As we have discussed in previous updates, the Tashkent Stock Exchange is a bit of a "walled garden" suffering from next to no international connectivity (no international custodians, clearing access for international brokers to gain exposure to the market, legislation for sub-accounts, etc.) This, of course, is a barrier for significant foreign capital to enter the market and is holding back multiple expansion of the fund’s equity positions, even though listed companies continue to post strong financial results on the back of the growing Uzbek economy.

Once this bottleneck is resolved via approved legislation, we anticipate, as stated in past newsletters, that this will be the catalyst for the next re-rating, which we imagine will lead to similar type gains to what we saw in 2020 and 2021 for the AFC Uzbekistan Fund as it will take very limited capital to generate such returns for the fund.

Again, the past two years have been boring, without mincing our words, but this is a consolidation in what we believe is a longer-term uptrend. Sitting tight in any investment is the most challenging aspect, not buying and not selling, as we live in an increasingly impatient world. However, patience should lead to solid returns in Uzbekistan as our underlying portfolio companies continue to execute successfully.

For example, of the companies that have reported full-year 2023 earnings, two are held by the fund and are among its top five holdings. The first is Qizilqum Cement (TSE: QZSM), the country's second-largest cement producer, and the Commodity Exchange (TSE: URTS).

QZSM's trailing twelve-month EPS grew 57% YoY, while book value grew 18%. The company ended April 2024 trading at a P/E of 2.52 and P/B of 0.36x. URTS's EPS grew by 16% YoY, while book value grew 17%. The company ended April trading at a P/E of 5.72%, P/B of 3.96x, and a dividend yield of 14.86%.

The waiting game is indeed frustrating, but it is part of the game of investing. The economy, for the most part, is moving in the right direction, while demand for materials and industrial products, and financial services, as a result of the real estate, infrastructure, and now Chinese-led investment boom, should remain strong for years to come. This will, of course, also boost employment and trickle down to increasingly strong consumer demand. The AFC Uzbekistan Fund has direct exposure to these facets of the economy and therefore stands to benefit once the market infrastructure enables the next re-rating.

Interview with Scott Osheroff

Scott Osheroff, CIO of the AFC Uzbekistan Fund was recently interviewed by “Pyramids and Pagodas” about the Uzbekistan economy and the investment opportunities in Uzbekistan:

David Henderson of Nomad Capitalist speaks on Uzbekistan

At the end of April 2024, the fund was invested in 24 names and held 7.7% cash. The portfolio was allocated to Uzbekistan (92.2%) and Kyrgyzstan (0.1%). The sectors with the largest allocation of assets were financials (46.3%) and materials (28.0%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 4.22x, the estimated weighted harmonic average P/B ratio was 0.86x, and the estimated weighted average portfolio dividend yield was 3.93%.

AFC Vietnam Fund - Manager Comment

The AFC Vietnam Fund returned −3.7% in April with a NAV of USD 3,048.27, bringing the year-to-date return to −3.1% and return since inception to +204.8%. The fund outperformed the benchmark, the Ho Chi Minh City VN Index, which lost 7.8% in April 2024 and has gained 2.5% year to date in USD terms. The fund’s annualized return since inception stands at +11.4% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.87%, a Sharpe ratio of 0.66, and a low correlation of the fund versus the MSCI World Index USD of 0.50, all based on monthly observations since inception.

This month’s setback was primarily attributed to several factors, including heightened geopolitical tensions surrounding the Israel-Iran conflict, a strengthening USD against most currencies, outflows of foreign investor capital, ongoing anti-corruption campaigning, and unsettling rumours in the domestic market.

Market Developments

Global financial markets experienced a widespread sell-off in April 2024, driven by escalating geopolitical tensions between Israel and Iran, fears of supply chain disruptions increasing commodity prices, and firmer-than-expected U.S. inflation data forcing the Federal Reserve to delay interest rate cuts. This confluence of geopolitical risks, inflationary pressures, and a strengthening U.S. dollar against major currencies fuelled investor risk aversion, prompting a flight to safety that exacerbated volatility across asset classes, with emerging markets bearing the brunt of the global retreat from risk assets.

The Strong USD

In April, the Vietnamese Dong (VND) experienced a depreciation of around 2% against the USD, reaching a record high of VND 25,333 per USD. This depreciation was primarily driven by the strength of the USD, which surged due to continued inflationary pressures in the U.S. during April. The Federal Reserve's decision to postpone interest rate cuts further bolstered the USD, causing it to strengthen against most global currencies, including the Vietnamese Dong. According to Bloomberg data, many emerging market currencies saw sharp declines in April, with the Vietnamese Dong still outperforming many of its counterparts.

Performance to USD, Year to Date (%)

Amidst the USD's strength and the weakened VND, foreign investors aggressively sold stocks in the Vietnamese market. In April alone, the net value of stocks sold by foreign investors amounted to USD 126 m, contributing to a total year-to-date net sold value of USD 0.51 bn. This substantial selling pressure from foreign investors weakened the market benchmark and caused frustration among local individual investors.

Net Value Sold by Foreign Investors from September 2023 to April 2024 (USD m)

In our assessment, aside from the strength of the USD, VND currently exhibits robust fundamentals. Over the first four months of 2024, Vietnam achieved a solid trade surplus, totalling USD 8.4 bn, marking one of the highest levels in its history. This surplus was propelled by the vigorous recovery of Vietnamese exports, which has enabled the country to accumulate substantial foreign reserves.
Furthermore, Vietnam continued to attract a significant influx of foreign direct investment (FDI), with total registered FDI reaching USD 9.27 bn and disbursements amounting to USD 6.28 bn, representing a 7.4% increase over the first four months of the year. This trend underscores the stability and growth trajectory of FDI into Vietnam, which has remained resilient despite the challenges posed by the COVID-19 pandemic.

Another contributing factor to the strength of the VND is the remarkable turnaround in the tourism industry. During the first four months of the year, Vietnam welcomed 6.2m international visitors, generating approximately USD 6 bn in revenue, reflecting a 68.3% year-on-year increase. According to the Vietnamese Tourism Department, the total number of international visitors to Vietnam is projected to reach 18.5m by 2025, surpassing the pre-pandemic levels seen in 2019.

International Tourist Arrivals to Vietnam (m)

Anti-corruption Campaign and Market Rumours

The sharp decline in April was influenced by the ongoing anti-corruption campaign and the spread of rumors, notably impacting local individual investors who dominate a significant portion of the daily trading volume. Mid-April saw rumors circulating about the potential resignation of a high-ranking political party member, coinciding with the resignation of Vietnam's parliament chairman, Vuong Dinh Hue, on 26th April 2024, citing unspecified "violations and shortcomings." Hue’s resignation came days after his assistant, Pham Thai Ha, was arrested on charges of abusing his position and power for personal gain on 21st April 2024, according to state media outlet VN Express.

In response to these challenges, we increased our cash position from 3% to approximately 16% by the end of April, aiming to leverage opportunities presented by undervalued growth stocks during market corrections. Although April did not witness a market rebound, we remain optimistic about a strong recovery in May and June, positioning ourselves to benefit from potential opportunities as market conditions improve.

The VN-Index

The VN-Index briefly retreated to its 200-day moving average intra-month but rebounded swiftly, now trading above it again. This movement signals a positive technical outlook, suggesting strength and resilience in the current market conditions.

The VN-Index is Trading Above its 200-Day Moving Average

Export and Consumer Sectors

As highlighted in our previous reports, the AFC Vietnam Fund has maintained a strategic focus on investing in export companies and consumer stocks, particularly those with compelling turnaround stories. April saw several consumer companies reporting remarkable recoveries, reaffirming our confidence in this sector.

One such success story is Hang Xanh Corporation (HAX), a leading luxury car dealer in Vietnam, boasting a 40% market share in Mercedes vehicles. Despite facing significant challenges in 2023, when the company's profits plummeted by 85% to VND 35 bn from a previous high of VND 239 bn, we are anticipating an aggressive recovery in 2024 and beyond, particularly after we met with the CEO back in August 2023. HAX's April performance showcased remarkable growth, with before-tax profits reaching VND 41 bn - up 583% year-on-year - marking three consecutive quarters of profit growth since the second quarter of 2023. As a result, HAX's stock price increased slightly, versus an 8% backdrop of the VN-Index in April, reflecting its impressive profit performance and reinforcing our investment thesis.

HAX Quarterly Before Tax Profit (VND bn)

In addition to HAX, other export and consumer companies such as PTB (furniture exporter), VGG (clothing exporter), and MWG (Vietnam’s largest retail store chain) also showcased notable turnarounds in the first quarter. These companies reported impressive pre-tax profit recoveries, with PTB +42%, VGG +95%, VNM +17%, and MWG published a remarkable turnaround result, increasing its pre-tax profit by 41.9 times! Their performance stands out against the market's growth of around 18%. Given that 2023 marked the only negative growth year for the export sector since 2009 and the consumer sector experienced only one year of negative growth due to the COVID-19 pandemic in 2021 over the past 15 years, we maintain our patience and conviction in the export and consumer sectors and anticipate these sectors to rebound and flourish soon.

At the end of April 2024, the fund’s largest positions were: Thien Long Group (7.9%) – a manufacturer of office supplies, Minh Phu Seafood Corp (7.3%) – a seafood company, Lam Dong Minerals and Building Materials JSC (7.0%) – a building material supplier, TNG Investment and Trading JSC (6.5%) – an apparel manufacturer, and Agriculture Bank Insurance JSC (6.5%) – an insurance company.

The portfolio was invested in 48 names and held 6.6% in cash. The sectors with the largest allocation of assets were consumer (57.5%) and materials (10.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 11.77x, the estimated weighted harmonic average P/B ratio was 1.20x, and the estimated weighted average portfolio dividend yield was 5.18%. The fund’s portfolio carbon footprint is 3.14 tons per USD 1 mn invested.

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

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