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AFC Asia Frontier Fund Reports Another Positive Quarter - March 2024 Update

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“You have to have confidence in your ability, and then be tough enough to follow through.”

– Rosalynn Carter – American writer, activist, humanitarian, and wife of President Jimmy Carter


Year to DateSince
AFC Asia Frontier Fund USD A1,625.98+1.1%+4.7%+62.6%

MSCI Frontier Markets Asia Net Total Return USD Index2

AFC Iraq Fund USD D1,495.49-5.3%+4.5%+49.5%
Rabee Securities US Dollar Equity Index -8.4%-1.0%+2.6%
AFC Uzbekistan Fund USD F1,588.85-2.6%-8.6%+58.9%

Tashkent Stock Exchange Index (in USD)

AFC Vietnam Fund USD C3,166.02+2.5%+0.7%+216.6%
Ho Chi Minh City VN Index (in USD) +1.9%+11.3%+114.9%
  1. The NAV given is for the lead share series for the relevant master fund. Investors’ holdings may be in a different share class, series, or currency and have a different NAV. See the factsheets and your statement for full details.
  2. Between 31st May 2017 and 30th November 2021 the benchmark was adjusted to be 37% of the MSCI Frontier Markets Asia Net Total Return USD Index “MSCI Index” and 63% of the Karachi Stock Exchange 100 Index in USD due to the removal of Pakistan from the MSCI Index during this period.
  3. NAV and performance figures are all net of fees.



AFC Asia Frontier Fund Reports Another Positive Month and Quarter

After a good performance in 2023, Asian frontier markets maintained their momentum into 2024 and had a solid start to the year. Kazakhstan and Sri Lanka are the second and sixth best-performing markets globally this year, respectively, in USD terms.

In addition to Kazakhstan and Sri Lanka, the AFC Asia Frontier Fund’s other key markets (including Mongolia, Pakistan, and Vietnam) have all performed very well so far in 2024. Furthermore, and more importantly, the AFC Asia Frontier Fund and Asian frontier markets continue to outperform their emerging market peers in Asia, a trend similar to 2023. The 1 Year return of the AFC Asia Frontier Fund now stands at a solid +28.4%.


AFC Asia Frontier Fund and Asian Frontier Markets have had a Strong Start to the Year 
(Year-to-Date USD Returns)

AFC Asia Frontier Fund and Asian Frontier Markets have had a Strong Start to the Year  (Year-to-Date USD Returns)

(Source: Bloomberg, USD returns between 29th December 2023 – 5th April 2024)


AFC Quarterly Webinar on Thursday, 25th April 2024

We will be hosting our regular quarterly webinar to update existing and potential investors on the performance and outlook for our funds. The webinar will be held on Thursday, 25th April 2024, at 9:00am NY, 2:00pm UK, 3:00pm Swiss and 9:00pm HK/SG time and will be recorded for viewing at your convenience.

The speakers on the webinar will be:

  • Thomas Hugger, CEO & Fund Manager
  • Ruchir Desai, Co-Fund Manager of the AFC Asia Frontier Fund
  • Ahmed Tabaqchali, Chief Strategist of the AFC Iraq Fund
  • Scott Osheroff, CIO of the AFC Uzbekistan Fund
  • Vicente Nguyen, CIO of the AFC Vietnam Fund

The webinar will highlight the following key points:

  • Key drivers of performance for the AFC Asia Frontier Fund so far in 2024
  • Are we still positive for the rest of 2024?
  • Key country and stock picks for the AFC Asia Frontier Fund
  • Longer-term structural trends benefitting Asian frontier countries
  • Outlook for the AFC Asia Frontier Fund / AFC Iraq Fund / AFC Uzbekistan Fund / AFC Vietnam Fund

The webinar will run for an hour and include a 15-minute Q&A session after the fund managers' presentations.

Please click on the button below to register for the webinar. If you are interested but unable to attend, please still register, and we will send you a link to the recording afterwards.






First Lustrum of the AFC Uzbekistan Fund and First Dozen Years of the AFC Asia Frontier Fund


AFC Asia Frontier Fund and Asian Frontier Markets have had a Strong Start to the Year  (Year-to-Date USD Returns)


Launched on March 29, 2019, the AFC Uzbekistan Fund was strategically positioned to capitalize on the nation's dynamic transformation. Following a pivotal leadership transition in 2016, Uzbekistan has been undergoing a significant metamorphosis, shifting from a state-directed economy towards a vibrant free-market system. This strategic alignment has already yielded substantial rewards, with the fund delivering a robust annualized return of +9.7% over its initial five-year tenure. Currently, the Uzbek market presents an exceptional investment opportunity, characterized by its remarkably low valuation juxtaposed with economic expansion and promising developmental prospects. This confluence of factors engenders a favourable forecast for the forthcoming five-year horizon, making it an opportune moment for discerning investors. Read more on the AFC Uzbekistan Fund further down below.

In addition to the AFC Uzbekistan Fund, our AFC Asia Frontier Fund marks a significant milestone this month, celebrating 12 years of innovative investment strategies in some of the world's most dynamic frontier markets. Expanding its reach to encompass 16 frontier countries, the fund has established itself as a flagship fund, seeking out unique investment opportunities and long-term trends that diverge from traditional investment pathways. This approach has not only distinguished us within the frontier market space but also underpinned our sustained and deepened expertise over the years in these markets.

As we continue to embrace this contrarian perspective, we are committed to unlocking value and generating substantial returns for our investors. Further details on the AFC Asia Frontier Fund are available in the manager comment section below.

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AFC Travel

Amman, Jordan 8th - 17th April Ahmed Tabaqchali
Hong Kong 18th - 26th April Andreas Vogelsanger
Baghdad/Sulaimani, Iraq 18th April - 30th May Ahmed Tabaqchali
Singapore 8th - 10th May Ahmed Tabaqchali
Singapore 27th - 28th May Ruchir Desai
Colombo, Sri Lanka 29th May - 1st June Ruchir Desai
Hong Kong 2nd - 14th June Andreas Vogelsanger
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AFC Vietnam Fund - Manager Comment

AFC Vietnam Fund Performance


The AFC Vietnam Fund returned +2.5% in March with a NAV of USD 3,166.02, bringing the year-to-date return to +0.7% and return since inception to +216.6%. The fund outperformed the benchmark, the Ho Chi Minh City VN Index, which gained 1.9% in March 2024 and has gained 11.3% year to date in USD terms. The fund’s annualized return since inception stands at +11.9% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.86%, a Sharpe ratio of 0.70, and a low correlation of the fund versus the MSCI World Index USD of 0.50, all based on monthly observations since inception.

In March, bank stocks began to trade sideways, prompting investors, especially local retail investors, to explore opportunities in other sectors, such as real estate and export-oriented companies. Also, the shift towards mid-cap stocks contributed to the VN-Index's resilience despite the slight decline in banking stocks, leading to an overall gain in the benchmark index.

Market Developments

Despite facing challenges such as the State Bank's withdrawal of money supply and the President's resignation, the market has displayed remarkable resilience. This resilience was evident in the market's ability to swiftly rebound following sharp declines in the index. Additionally, the market's resilience is supported by strong liquidity and the prevailing low-interest rate environment. Furthermore, the VN-Index's current position above its 200-day moving average indicates a positive technical outlook for the market.


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

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

(Source: Bloomberg)


Export Stocks Rallied in March

Export stocks experienced significant growth in March, building upon the impressive results observed in the first two months of the year, particularly within the furniture sector. As previously mentioned in our February 2024 report, export growth across various sectors was notable, with furniture exports in particular experiencing a remarkable 74% increase to reach USD 2.4 bn in January and February combined. This positive momentum continued to bolster furniture exporters throughout March.

One notable illustration of our investment strategy in action is Phu Tai Corporation (PTB), a leading local furniture exporter in Vietnam and a significant component of our portfolio. In March, PTB demonstrated a remarkable performance, with its stock price soaring by 14.4% from VND 57,600 per share to 65,900 VND per share.

Over the past decade, PTB has consistently exhibited robust growth, with its net profit skyrocketing by 607% from VND 71 bn in 2012 to VND 502 bn in 2022. However, in 2023, the company experienced a significant downturn in net profits, attributable to a sharp decline in demand from key markets such as the U.S. and the EU.

Despite this setback, PTB boasts impressive profitability metrics, including a commendable return on equity (ROE) of 19%. Our steadfast commitment to PTB exemplifies our investment philosophy, characterized by meticulous evaluation of each company and strategic entry during periods of sectoral adversity, followed by patient anticipation of a recovery.


Net Profit of PTB Over the Past 10 Years (VND bn)

Net Profit of PTB Over the Past 10 Years (VND bn)

(Source: PTB, AFC Research)


Vietnam has experienced negative export growth only twice in the last twenty years, in 2009 and 2023. In both instances, export growth strongly rebounded and accelerated rapidly post-recovery. Therefore, we remain confident in the export sector's resilience and growth potential, underscoring our strategic investment direction.

As emphasized in our previous reports, our decision to maintain an underweight position in banks is rooted in our cautious approach towards the sector's non-performing loan (NPL) ratio. Despite the rapid growth observed in bank stocks during the first two months of the year, we remain committed to prioritizing investments in the resilient and confirmed recovery of the export sector. However, we plan to reassess our strategic approach to banking stocks following the announcement of the first-quarter 2024 results in the latter half of April 2024. At that juncture, we will conduct a comprehensive analysis to determine the most suitable course of action regarding potential investments in this sector.

While the first quarter of 2024 has been challenging, our track record over the past few years, or even since our inception more than 10 years ago, underscores our consistent ability to outperform the index. This steadfast performance reaffirms our confidence in our investment approach and our unwavering commitment to delivering robust returns to our investors over the long term.

  • 2021 was the second year of the COVID-19 pandemic, but it was our record year with a net performance of the AFC Vietnam Fund of +55.61% net to investors, while the VN Index in USD terms over the same period achieved a performance of +37.35%.
  • 2022 was a terrible year with intense corruption investigations and arrests of high-ranking government officials and business magnates. Also, the State Bank of Vietnam targeted real estate developers who issued corporate bonds and illegally sold them to retail investors. In that year, the AFC Vietnam Fund lost 18.84%, while the VN Index in USD terms over the same period lost 35.08%.
  • 2023 was also a challenging year, especially for an export-oriented economy like Vietnam. There were challenges due to significantly lower consumption in Europe and the U.S. due to inflation and recession fears. However, the Vietnamese economy began to improve gradually towards the end of 2023, with export numbers showing positive growth again. In 2023, the AFC Vietnam Fund achieved a return of +9.02%, while the VN Index achieved a return of +9.26% in USD terms over the same period.

AFC Vietnam Fund Performance Versus the Index Since Inception

AFC Vietnam Fund Performance Versus the Index Since Inception

(Source: Bloomberg)


Resignation of Vietnam’s President

The recent resignation of Vietnam's President, Vo Van Thuong, and the appointment of Vice President Vo Thi Anh Xuan as acting president has sparked concern among various international political and economic institutions. However, for several reasons, we believe that this event will have limited impact on Vietnam's economic strategy and outlook.

Firstly, it's important to note that major economic and political policies in Vietnam are determined by the 18-member Party Central Committee rather than a single individual. Therefore, changes in leadership at the presidential level are unlikely to significantly alter the country's overall direction or policies.

Secondly, the president's role in Vietnam is primarily symbolic. He or she represents moral values through public image rather than holding substantial political or economic power. As such, the change in presidency is unlikely to have a substantial impact on Vietnam's economic strategy or trajectory.

Overall, while President Vo Van Thuong's resignation may have raised concerns among some international observers, we believe that the fundamental drivers of Vietnam's economic policies and outlook remain intact, guided by broader institutional structures and collective decision-making processes within the Party Central Committee.

One Step Closer to a Market Upgrade to Emerging Market Status

The State Securities Commission of Vietnam (SSC) has introduced a draft circular proposing amendments and supplements to existing regulations governing securities transactions and information disclosure in the stock market. Key revisions outlined in the draft include the removal of the pre-funding requirement for foreign institutional investors, clarification on handling investor shortages of funds, and language requirements for information disclosure.

The proposed regulatory changes aim to address barriers hindering the Vietnamese stock market's progression from Frontier Market to Emerging Market status, particularly pre-funding requirements and English language disclosures. While the draft circular is a step in the right direction, several issues still require clarification, such as standardizing agreement terms, implementing penalty mechanisms for non-payment, and sharing the quality of investor payment records.

Despite these concerns, the draft circular reflects the authorities' commitment to resolving market issues. This positive development, coupled with the anticipated launch of the KRX trading system this year, is expected to bolster market sentiment and liquidity. Stock brokerage company Vietcapital predicts that leading securities firms with strong capital will be the primary beneficiaries of these advancements.

Trial and Sentencing of Chairwoman of Van Thinh Phat

In our Vietnam report from October 2022, we highlighted the arrest of Mrs. Truong My Lan, the Chairwoman of Van Thinh Phat, a prominent real estate group. This event had a significant impact on the market at the time, contributing to further declines throughout the year. After more than a year of investigations, the Van Thinh Phat court case commenced in March 2024 and is expected to conclude at the end of April 2024. We believe that this event is already priced into the market, and hence, we don’t expect any significant impact.

The severity of the situation is underscored by the potential consequences facing Mrs. Truong My Lan. With allegations of substantial losses amounting to approximately USD 20 bn (equivalent to around 5% of Vietnam's GDP) incurred by investors and Saigon Commercial Bank, she may potentially face the death penalty. If such a verdict is reached and finalized, it would serve as a significant deterrent against similar cases in the future, aiming to prevent and eliminate such egregious financial misconduct within the industry.

Comprehensive Strategic Partnership Agreement with Vietnam – Australia

Vietnam has recently elevated its relationship with Australia to a Comprehensive Strategic Partnership, marking a significant milestone in bilateral ties. This agreement involves a comprehensive and multi-faceted collaboration across various domains, including political, economic, security, cultural, and people-to-people exchanges. It represents a commitment from both parties to deepen and strengthen their relationship significantly and to work closely together on shared interests and common goals. Australia stands as one of Vietnam's most crucial and largest trade partners, with trade turnover witnessing a remarkable surge from USD 5.1 bn in 2013 to USD 13.7 bn in 2023. Renowned for its abundant natural resources, Australia's status as a major exporter has positioned itself as a vital economic ally for Vietnam. The escalating trade tensions between China and Australia have further bolstered Vietnam's advantageous position, as many Australian companies have turned to Vietnam as an export hub for China-bound goods. The newly forged Comprehensive Strategic Partnership between Vietnam and Australia is poised to provide a substantial boost to Vietnam's economic growth trajectory.


Trade Value with Australia (USD bn)

Trade Value with Australia (USD bn)

(Source: GSO, AFC Research)


Comprehensive Strategic Partners of Vietnam

Comprehensive Strategic Partners of Vietnam

(Source: MOFA)


With this development, Australia joins the ranks of China, Russia, India, South Korea, the U.S., and Japan as Vietnam's seventh Comprehensive Strategic Partner. Vietnam's unique distinction lies in its ability to establish robust relationships with all major global economies, a testament to its diplomatic prowess and strategic significance on the international stage.

Recovery of Vietnam’s GDP Growth

In March, amidst global turbulence, Vietnam continues to solidify its reputation as a prime investment destination, supported by robust macroeconomic indicators. The first quarter of the year witnessed a remarkable resurgence in Vietnam's GDP growth, with an impressive jump of 5.6%, the highest rate for the period since 2020. Notably, the export sector demonstrated remarkable resilience, registering a substantial increase of 14.2% compared to the sharp decline observed last year. Additionally, Foreign Direct Investment (FDI) remained steady, reaching 4.6 bn USD in the first quarter.


Vietnam's GDP Growth

Vietnam's GDP Growth

(Source: GSO, AFC Research)


At the end of March 2024, the fund’s largest positions were: Thien Long Group (8.3%) – a manufacturer of office supplies, Minh Phu Seafood Corp (8.3%) – a seafood company, TNG Investment and Trading JSC (7.5%) – an apparel manufacturer, Lam Dong Minerals and Building Materials JSC (7.1%) – a building material supplier, and Agriculture Bank Insurance JSC (6.8%) – an insurance company.

The portfolio was invested in 47 names and held 9.6% in cash. The sectors with the largest allocation of assets were consumer (58.7%) and utilities (10.5%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 12.02x, the estimated weighted harmonic average P/B ratio was 1.27x, and the estimated weighted average portfolio dividend yield was 4.84%. The fund’s portfolio carbon footprint is 6.14 tons per USD 1 mn invested.

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AFC Asia Frontier Fund Performance


The AFC Asia Frontier Fund (AAFF) USD A-shares returned +1.1% in March 2024 with a NAV of USD 1,625.98. The fund underperformed the benchmark MSCI Frontier Markets Asia Net Total Return USD Index (+1.6%) and the MSCI World Net Total Return USD Index (+3.2%) and the MSCI Frontier Markets Net Total Return USD Index (+4.2%). Year-to-date, the fund shows a +4.7% return versus the benchmark, which went up by +6.4%. The performance of the AFC Asia Frontier Fund A-shares since inception on 30th March 2012 now stands at +62.6% versus the benchmark, which is down by 18.8% during the same period, showing an outperformance of +81.4% since inception. The fund’s annualized performance since inception is +4.1%. 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 0.52, all based on monthly observations since inception.

It was another positive month and quarter for the AFC Asia Frontier Fund. The momentum that the fund’s performance has been witnessing does not surprise us since we have been communicating for the past few quarters that the AFC Asia Frontier Fund and Asian frontier markets are well positioned for a strong re-rating. The rally in Asian frontier markets continues to be driven by three main factors: monetary policy easing, earnings and macro recovery, and discounted valuations.

Performance in March was driven by Kazakhstan, Sri Lanka, Vietnam, and Georgia, while Iraq, Bangladesh, and Uzbekistan impacted performance negatively.

The Colombo Stock Exchange All Share Index in Sri Lanka is showing a robust rally as key triggers come together. GDP growth for 4Q23 came in at +4.5%, the second quarter in a row of economic expansion, and reflects the turnaround the country is making. More importantly, tourist arrivals in Sri Lanka are well on track to return to pre-pandemic levels by the end of 2024.


Sri Lanka’s Economy is Gaining Momentum with Another Positive Quarter of GDP Growth

Sri Lanka’s Economy is Gaining Momentum with Another Positive Quarter of GDP Growth

(Source: Bloomberg)


Monthly tourist arrivals have been greater than 200,000 between December 2023 – March 2024, and this points to a very successful peak tourist season for Sri Lanka, which has also helped build up its foreign exchange reserves. The recovery in both tourism revenues and worker remittances has led to enough USD supply in the economy with the Sri Lankan rupee appreciating by 8.3% against the USD so far this year, making it one of the best performing currencies globally.


Sri Lanka Tourist Arrivals are on Track to Recover to Pre-Pandemic Levels

Sri Lanka Tourist Arrivals are on Track to Recover to Pre-Pandemic Levels

(Source: Sri Lanka Tourism Development Authority)


A Recovery in Sri Lanka's Tourism and Remittances Flows have been Positive for Macro Stability
(in USD bn)

A Recovery in Sri Lanka's Tourism and Remittances Flows have been Positive for Macro Stability (in USD bn)

(Source: Central Bank of Sri Lanka)


Furthermore, with inflation well under control, the Central Bank of Sri Lanka cut its benchmark interest rate by another 50 basis points, bringing the total interest rate reduction to 700 basis points over the past twelve months. We remain positive on the Sri Lanka turnaround story and have added to our existing Sri Lankan positions in 1Q24.

As inflation eases across our universe, monetary easing has been a big theme in Asian frontier markets since the second half of 2023, and this continues into 2024, with the Central Bank of Mongolia and the National Bank of Georgia decreasing their benchmark interest rate by 100 basis points and 75 basis points, respectively (this is the first interest rate cut by the Central Bank of Mongolia since the pandemic in 2020).


March 2024 was Another Busy Month for Asian Frontier Central Banks with More Interest Rate Cuts
(in Basis Points)

March 2024 was a Busy Month for Asian Frontier Central Banks with More Interest Rate Cuts (in basis points)

(Source: Bloomberg, Central Bank of Mongolia)


Bangladesh’s macro-economic indicators also showed an improvement, with exports gaining momentum over the last few months, led by growth in garment exports. Bangladesh is now the second largest garment exporter globally after China as its garment industry has benefitted from the global supply chain relocation.


Bangladesh Exports Gain Momentum with 1Q24 Export Growth of 11.1% (in USD bn)

Bangladesh Exports Gain Momentum with 1Q24 Export Growth of 11.1% (in USD bn)

(Source: Bangladesh Export Promotion Bureau)


Vietnam’s economic recovery is also stabilising, with GDP growth in 1Q24 clocking in at 5.7%, while export growth was impressive at 17.0%. As Vietnam’s economic recovery takes shape, the fund’s bottom-up stock selection is serving it well, with the AFC Asia Frontier Fund’s Vietnam holdings making a gain of +13.1% year to date versus a gain of +11.3% for the VN-Index, both in USD terms.


GDP Growth in Vietnam is Stabilising with 1Q24 GDP Growth of 5.7%

GDP Growth in Vietnam is Stabilising with 1Q24 GDP Growth of 5.7%

(Source: Bloomberg)


The best-performing indexes in the AAFF universe in March were Sri Lanka (+7.4%) and Kazakhstan (+5.7%). The poorest-performing markets were Iraq (-8.4%) and Bangladesh (-6.8%). The top-performing portfolio stocks this month were an online classifieds company operating in Asian frontier countries (+27.5%), a Kazakh fintech company (+23.7%), a Mongolian convenience chain operator (+20.9%), a Mongolian junior copper miner (+20.0%), and a Mongolian junior gold miner (+18.8%).

In March, the fund added to existing positions in Bangladesh, Cambodia, Mongolia, Pakistan, and Sri Lanka and reduced existing positions in Mongolia. The fund also exited a paint company in Pakistan and a mall operator in Vietnam. 

At the end of March 2024, the portfolio was invested in 65 companies, 2 funds, and held 12.8% in cash. The two biggest stock positions were a fintech company in Kazakhstan (5.2%) and a bank in Kazakhstan (4.0%). The countries with the largest asset allocation were Vietnam (14.0%), Iraq (11.9%), and Kazakhstan (11.3%). The sectors with the largest allocation of assets were financials (28.9%) and consumer goods (20.7%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.05x, the estimated weighted harmonic average P/B ratio was 1.25x, and the estimated weighted average portfolio dividend yield was 2.74%. The fund’s portfolio carbon footprint is 0.56 tons per USD 1 mn invested.

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AFC Uzbekistan Fund - Manager Comment

AFC Uzbekistan Fund Performance


The AFC Uzbekistan Fund Class F shares returned −2.6% in March 2024 with a NAV of USD 1,588.85, bringing the return since inception (29th March 2019) to +58.9%, while the return for the year stands at −8.6%. On an annualised basis, the fund has returned +9.7% p.a. with a Sharpe ratio of 0.55.

March saw continued moderate selling among local investors in the market, which has made valuations exceptionally attractive. With new inflows to the fund, we look forward to again taking advantage of the value in the market, especially for blue-chip companies.

AFC Uzbekistan Fund’s 5th Birthday

On 29th March 2024, the AFC Uzbekistan Fund celebrated its fifth birthday. How quickly time has passed and how much Uzbekistan has changed since Thomas and Scott first came here in 2018. Our initial thesis of Uzbekistan morphing into the most important economy in Central Asia is indeed on track as the country emerges into the manufacturing and logistical heartland of the greater region. 

While the past 18 months have seen a correction in equity prices on the Tashkent Stock Exchange, leading to recent weakness in the fund’s performance, capital markets reforms are moving in the right direction, with the most recent news being that Bank of Georgia (“BOG”) is the first participant in the Uzbek government’s “Regulatory sandbox” scheme which will allow BOG to move toward providing custody services for government and corporate bonds and eventually equities. 

Things are certainly moving slower than we would like as capacity within the government remains an extreme headwind. Still, we are encouraged by the direction of continued development, even if it is happening slower than we would like. The transformation of Uzbekistan and the capital markets over the next five years should, therefore, be even more profound than the last five, and we look forward to having the AFC Uzbekistan Fund benefit, as a first mover in the country.

Uzbekistan’s Pivot to China

Since the start of 2024, Uzbekistan has made nothing short of a lightning-fast pivot to China. The Uzbek government appears to be looking to balance influence in the region by conducting more business with China to counterbalance Russian investment. 

As stated in previous updates, the “New Fertile Crescent Region” is going to see the formation of a socio-economic bloc stretching from Russia, China and Central Asia into the Middle East. Uzbekistan is accelerating regional integration, shifting some of its focus of investment from Russia toward China and the change year to date has been impressive and visible on the ground. However, as good leaders do, if Chinese influence begins to get too strong in Uzbekistan, we wouldn’t be surprised to see President Mirziyoyev begin courting Europe in order to play them off against China and Russia, and vice-versa. Regardless, as the great game of geopolitical chess gets more complex, Uzbekistan is in a position to benefit as foreign direct investments soar. 

From electricity generation, battery storage, mining, logistics, metal fabrication, auto production, to textiles, the scale and number of Chinese investment deals announced during March alone have been staggering. 

Some of the more interesting ones include China working with the Uzbek government to jointly develop two low-quality uranium projects. The quality of the projects is important to note because China is focused on securing uranium supply regardless of cost, making several of Uzbekistan’s mothballed Soviet-era projects interesting again, especially to a state-owned enterprise investor who is price agnostic. China Energy Construction Group broke ground on Monday 25th March 2024, on a 300 megawatt-hour battery energy storage system, which is intended to store renewable energy produced during non-peak periods. This will be an interesting project as Uzbekistan is planning to generate 25% of its electricity from renewables by 2030, which could have catastrophic consequences as grid instability rises, but time will tell as the country pushes apace with over a dozen solar and wind projects. 

Further, China Mining Energy Group plans to invest USD 200 million in a copper metallurgy plant, and CNOOD Asia Limited plans to build a textile complex for USD 325 million, both in Namangan region in eastern Uzbekistan. The car manufacturer BYD, who has already partnered with state-owned UzAvto to build BYD electric cars in Uzbekistan, announced a USD 160 million expansion plan to grow annual production from 50,000 vehicles in 2024 to 500,000 while China’s Geely Automobile Holdings Limited plans to begin selling its Zeekr brand of electric cars in the market this year.

In addition to these investment projects, the Asian Infrastructure Investment Bank (AIIB) will invest USD 670 million in reforms to help Uzbekistan transition toward a market-oriented economy. 

The above are just some of the deals that were announced while new Chinese restaurants and a few hotels are springing up in Tashkent, as Chinese are increasingly present on the city’s streets. The pace of change involving Chinese investment is nothing short of impressive, reminiscent of what I experienced when living in Phnom Penh, Cambodia, in 2015 and the rapid transformation of Cambodia that followed as Chinese capital began to flood into the market.

AFC Uzbekistan Tour 2024

For those interested in visiting Uzbekistan with us, we are organizing our third AFC Uzbekistan Tour, which will be held from Sunday 19th May 2024 to Tuesday 21st May 2024. We will begin on the 19th with a day tour of Tashkent, followed by company meetings and site visits on the 20th and 21st. If you are interested in joining, please write us at This email address is being protected from spambots. You need JavaScript enabled to view it..

At the end of March 2024, the fund was invested in 24 names and held 10.4% cash. The portfolio was allocated to Uzbekistan (89.56%) and Kyrgyzstan (0.05%). The sectors with the largest allocation of assets were financials (41.0%) and materials (28.1%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 4.31x, the estimated weighted harmonic average P/B ratio was 0.79x, and the estimated weighted average portfolio dividend yield was 3.97%.

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AFC Iraq Fund Performance


The AFC Iraq Fund Class D shares returned −5.3% in March 2024 with a NAV of USD 1,495.49, outperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which lost 8.4% during the month. The fund was up 4.5% year to date versus 1.0% down for the index. Since inception, the fund has gained 49.5% while the RSISUSD index was up by 2.6%, an outperformance of 46.9%.

The onset of the fasting month of Ramadan at the end of the second week of the month provided the market, and its participants, with a much-needed respite from the powerful momentum of the last few months, and an opportunity to consolidate the solid gains of this momentum (chart below) – with the extent of the consolidation influenced by the fundamentals that drove these gains. Key among them were the significant developments discussed a few months ago in “Banks to Fuel the Market’s Next Phase” that would lead to an acceleration in the growth of net profit and equity values for the top-quality banks. The extent of this acceleration can be seen from the stellar year-over-year growth in 2023 for the country’s top-four banks (table below)– which are among the main holdings of the AFC Iraq Fund, and among the RSISX USD Index’s major constituents.


Rabee Securities U.S. Dollar Equity Index

Rabee Securities U.S. Dollar Equity Index

(Source: Iraq Stock Exchange, Rabee Securities, AFC Research, daily data as of 31st March 2024)


Year-over-Year Comparisons

Year-over-Year Comparisons

(Source: Rabee Securities, AFC Research, data as of Q4/2023)
(Note: All numbers rounded up for ease of display, while percentage changes are of actual numbers)


The catalyst for this spectacular growth was the Central Bank of Iraq’s (CBI) new procedural requirements for its provisioning of U.S. dollars for cross-border transfers in mid-November 2022, and the subsequent series of measures throughout 2023, which promise to accelerate the adoption of banking and bring about a transformation of the sector and its role in the economy. All of which disproportionally benefited the top-quality banks, whose net profit and equity values accelerated quarter on quarter from the 4th quarter of 2022 (Q4/2022), and throughout 2023 as the CBI’s measures came into effect as discussed in the market outlook for 2024 in “What Next After a Gangbuster Year ???”

This acceleration can be appreciated by considering it in the context of the growth of each of these banks over the last four years as in the two graphs below. The first is that of trailing 12-month net profit, while the second is of trailing equity values, for Q4/19 – Q4/23. Both have been normalised, with Q4/19 figures set at 100 to allow for a review of the growth of these two key measures during this period, and for an easy comparison between the four banks – with the areas in pink background showing the effects of the acceleration that began in Q4/2022.


Normalised Trailing 12-Months Net Profit

Normalised Trailing 12-Months Net Profit



Normalised Trailing 12-Months Equity Values

Normalised Trailing 12-Months Equity Values

(Sources: Rabee Securities, AFC Research, data as of Q4/2023. Note: The graphs based on this data, are for net profit and equity value of the company and not per-share data.)


The National Bank of Iraq (BNOI) and the Bank of Baghdad (BBOB) both had a sharp acceleration in net profit and equity value quarter-on-quarter (above two charts), and both finished with stellar year-over-year growth for 2023 (above table). For the two banks, this growth builds upon the successful strategies pursued by each over the course of the prior few years as reviewed in “The Opportunity in Retail Banking” and in “Banks and the Predictability of Earnings”. Following these two, but with a distance, was Mansour Bank (BMNS), which still experienced strong growth, while the Commercial Bank of Iraq (BCOI) lagged the three, but nevertheless had solid year-over-year growth in 2023 (*). For all of these banks, the accelerations in net profit and equity values builds upon the gradual multi-year recovery in the banking sector following the 2014-2017 economic crisis that devastated the sector, as reviewed in “Private Sector Deposit & Loan Growth Continues”; and in which each of the four banks pursued different strategies for recovery that drove each banks’ growth trajectory.

The intensity of such an acceleration should moderate meaningfully over the course of the next few quarters, and the quarterly progression will likely be uneven, leading to a new normal for the net profit and equity value growth profile for each of the four banks. However, five strong quarters, i.e., Q4/22-Q4/23, are not enough to arrive at a picture of what this new normal is, as the CBI’s measures would unfold over a long time - more likely measured in years than months – and importantly as the banks adapt their strategies and infrastructures to accommodate these higher growth levels. Nevertheless, it’s clear that the future growth trajectories of the four banks will be from a much higher base, and from a significantly improved financial position. Moreover, this new normal will be marked by an increased adoption of banking and of formality, coupled with a move away from the dominance of cash and informality – developments that AFC Iraq Fund’s investment thesis for the banking sector contends would come with growth in bank lending, resulting in an expansion of the money circulating in the economy and consequently to an increase in non-oil GDP. Over time, the banks’ net profit should grow substantially, and ultimately feed into higher stock market valuations driven by both net profit momentum and by increases in market multiples placed upon these net profits.

In conclusion, we believe that the upside opportunity for the AFC Iraq will come about as the RSISX USD Index, which by close of the month is 26.9% below its 2024 peak, regains that peak and rallies further reflecting the expected increases in banks’ net profit driven mostly by the fundamental developments discussed here. However, risks remain given Iraq’s recent history of conflict, extreme leverage to volatile oil prices, as well as the risks of a potential widening of the current Middle East conflict that could destabilise the region – as reviewed recently in “Markets Continue to Look Through Tensions”.

At the end of March 2024, the AFC Iraq Fund was invested in 10 names and had a cash level of 6.1%. 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 (92.4%), Norway (1.2%), and the U.K. (0.3%).

The sectors with the largest allocation of assets were financials (76.3%) and consumer staples (10.7%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.08x, the estimated weighted harmonic average P/B ratio was 1.59x, and the estimated weighted average portfolio dividend yield was 3.06%. The fund’s portfolio carbon footprint is 0.07 tons per USD 1 mn invested.

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