“Get it down. Take chances. It may be bad, but it’s the only way you can do anything really good.”

– William Faulkner - an American writer of novels and short stories

AFC Funds Performance Summary

Despite the intense geopolitical tensions in the Middle East, Asian frontier markets managed to navigate this volatility, with many of our markets reporting a convincing performance in June 2025. As noted in our previous newsletters, many of our markets, particularly those in South Asia, such as Bangladesh, Pakistan, and Sri Lanka, are entering a phase of stability and growth after enduring a challenging few years. Therefore, it is not surprising that these markets bounced back from the jitters experienced in mid-June due to the tensions in the Middle East.

Asian Frontier Markets had a Convincing Month Despite Military Tensions in the Middle East 
(USD Returns in June 2025)

Ruchir Desai, Co-Fund Manager of the AFC Asia Frontier Fund, visited Colombo, Sri Lanka, during the month to meet with policy-makers and the fund’s portfolio companies. We will provide more information on Sri Lanka in our upcoming Sri Lanka travel report, which will be published in the coming weeks.

Ruchir Desai, Co-Fund Manager of the AFC Asia Frontier Fund with Mr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka

Thomas Hugger, CEO and Co-Fund Manager of the AFC Asia Frontier Fund, was also on the ground in Baghdad, Iraq, along with Ahmed Tabaqchali, the Chief Strategist of the AFC Iraq Fund and they both met with the AFC Iraq Fund’s portfolio companies.

Being on the ground in the countries we invest in is an essential part of our investment process for our AFC Funds.

Thomas Hugger, CEO and Fund Manager together with Ahmed Tabaqchali, Chief Strategist of the AFC Iraq Fund in front of the Iraq Stock Exchange in Baghdad, Iraq

On the trade front, the U.S. and Vietnam have announced a new trade framework that includes a 20% tariff on all goods exported from Vietnam to the U.S. This 20% tariff aligns with market expectations.

Furthermore, this trade and tariff announcement also removes some of the uncertainties over U.S.-Vietnam trade relations for the time being. As more details on the trade framework emerge, we will gain greater clarity on the potential economic impact on Vietnam.

AFC Iraq Fund – Ten-Year Anniversary

It was a significant month for Asia Frontier Capital as the AFC Iraq Fund celebrated its 10^th anniversary. The fund has been a pioneer in the frontier markets space as we seek out promising investment ideas and longer-term themes that exist outside the “normal” or “mainstream” geographies, and back it up with long term performance. The performance of the fund has been exceptional, achieving a return of 198.0% over the last 3 years and an annualised return since inception of 8.1% p.a.

AFC Asia Frontier Fund Nomination - HFM APAC Performance Awards 2025

I am pleased to announce that our AFC Asia Frontier Fund has been nominated for the HFM APAC Performance Awards 2024 in the category of "Emerging Manager - Smaller Fund - Equity" for the second time in a row. This is a wonderful recognition for the excellent work by fund managers Thomas Hugger and Ruchir Desai.

AFC Quarterly Webinar on Thursday, 24^th July 2025

Asian frontier markets and AFC Funds have had a stable first half of the year and have weathered the geopolitical and macro-economic uncertainties in a robust manner and we are now beginning to see greater momentum in Asian frontier markets in the second half of 2025 as anticipated by us.

Please join us for our quarterly update on Asian frontier markets where we will discuss these important developments like the performance and outlook for our AFC Asia Frontier Fund, AFC Iraq Fund, AFC Uzbekistan Fund, and AFC Vietnam Fund.

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:

• Which markets were the key drivers of performance in the first half of 2025
• How are Asian frontier markets navigating the geopolitical and macro-economic uncertainty
• Key country picks for the AFC Asia Frontier Fund in the second half of 2025 and beyond
• Positive catalysts and key concerns going forward
• Outlook for the AFC Asia Frontier Fund, AFC Iraq Fund, AFC Uzbekistan Fund, and AFC Vietnam Fund

The webinar will be held on Thursday, 24^th July 2025 at 9:00 am NY, 2:00 pm UK, 3:00 pm Swiss and 9:00 pm HK/SG time and will be recorded for viewing at your convenience.

The webinar will run for 75 minutes, including a 30-minute Q&A session following the fund managers' presentations.

If you are unable to attend, please register nonetheless, and we will send you the link to the regarding a day after the webinar.

July 2025 Subscription Cut-Off Date

The next cut-off date for subscriptions for our funds will be 25^th July 2025. 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 June 2025.

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 Baghdad. 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 Vietnam Fund - Manager Comment

The AFC Vietnam Fund returned +6.5% in June with a NAV of USD 3,426.25, bringing the 2025 return to −1.2% and return since inception to +242.6%. This month, the fund outperformed the benchmark, the Ho Chi Minh City VN Index, which gained 3.0% in USD terms. The fund’s annualised return since inception stands at +11.3% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.85%, a Sharpe ratio of 0.63, and a low correlation of the fund versus the MSCI World Index USD of 0.40, all based on monthly observations since inception.

In June, the VN-Index was buoyed by strong economic data, despite lingering concerns over U.S. trade negotiations and heightened geopolitical tensions from the Israel-Iran conflict.

VN-Index

Market Developments

The Vietnamese stock market appears to have overcome the tariff shock triggered in early April, when President Trump announced an unexpected 46% tariff on Vietnamese goods, only to postpone the policy a few days later. As the immediate impact of the announcement faded, investor confidence gradually returned. Market liquidity improved significantly, driving a strong VN-Index recovery to its highest level in three years. This rally was fuelled by both robust economic fundamentals and a surge in new investor participation. According to the Vietnam Securities Depository (VSD), the total number of stock trading accounts reached 10 million, equivalent to 10% of the country's population. Our research also indicates a notable influx of new investors entering the market, providing critical momentum behind the VN-Index's recent performance.

Number of Stock Trading Accounts (mn)

Macroeconomic Picture Improving Rapidly

Macroeconomic developments also played a key role in supporting market sentiment. According to Vietnam’s Vice Prime Minister Nguyen Hoa Binh, the country's GDP growth in the second quarter of 2025 is expected to reach 7.6%, positioning Vietnam among the world's fastest-growing economies. He emphasized that the government’s ambitious full-year growth target of 8% remains within reach. Speaking at the National Assembly, the Vice PM highlighted that foreign direct investment (FDI) remains strong despite concerns over U.S. tariff policies. As of the end of June, registered FDI exceeded USD 20 bn, while FDI disbursement rose by 11% to surpass USD 12 bn. This sustained FDI inflow, viewed as a long-term growth driver, reflects continued confidence from international investors and multinational corporations in Vietnam’s economic potential.

Vietnam GDP Growth

Strong Earnings Growth in Q2 2025

Earnings growth in the second quarter of 2025 is expected to exceed 20% across many listed companies, particularly in the banking, public investment, and manufacturing sectors. Lam Dong Minerals and Construction Materials JSC (LBM), AFC Vietnam Fund’s largest position, anticipates doubling its Q2 earnings and reaching its full-year profit target within just six months. This strong outlook has already driven LBM's share price up by 5.5% in June. According to LBM’s CEO, the surge in public infrastructure investment—especially new highway projects—has been a significant catalyst. He also welcomed the government’s recent master plan on provincial restructuring, which is expected to fuel a construction boom. Following the National Assembly's 12^th June 2025 decision to reduce the number of provinces from 63 to 34, Lam Dong will merge with Dak Nong and Binh Thuan to become Vietnam’s largest province by area. This will require two to three new highways to ensure regional connectivity, directly benefiting LBM’s long-term growth prospects. Similar infrastructure demand is expected across other newly merged provinces, setting the stage for a nationwide construction boom over the next 5–10 years.

Lam Dong Minerals and Construction Materials’ Net Profit Jumped in 2Q 2025 (VND bn)

Vietnam’s Transformation

While concerns about potential U.S. tariffs continue to dominate the headlines and investor sentiment, many overlook a much more powerful and lasting development underway in Vietnam. As highlighted in our May report, Resolution 68 marks a historic shift in the country's economic strategy by placing the private sector at the centre of national growth. Unlike past policies that often faded without concrete execution, this resolution is already showing real momentum.

For the first time in history, a project of national significance—the proposed USD 67 bn North-South high-speed railway—may be built by private Vietnamese enterprises. Leading conglomerates Vingroup and Thaco Group have formally submitted proposals to the government, committing to deliver the project ahead of schedule. Though final approval is pending, this bold initiative signals that Resolution 68 is more than just words—it is being implemented. This transformation from state-led to private-driven development marks a new era for Vietnam, laying the foundation for sustainable, long-term growth.

Two Private Giants Compete to Build Vietnam’s First High-Speed Railway

Vietnam’s transformational North–South high-speed railway project has attracted two groundbreaking proposals from local conglomerates Vingroup (via Vinspeed) and Thaco Group. Both companies propose direct investment under the Investment Law, each committing 20% equity. Vingroup requests the remaining 80% be financed by the government at 0% interest, while Thaco seeks financing from domestic and international lenders with government guarantees. Vinspeed promises a faster construction timeline of 5 years and a 99-year project lifespan, compared to Thaco’s 7 years and 70-year term. Ticket pricing under Vinspeed would range between 60–75% of airfares, while Thaco’s pricing would be subject to government approval. Notably, Thaco includes international technology partners from Germany, France, Japan, and South Korea, and proposes a transit-oriented development (TOD) model for urban areas. Both proposals signal a strong private-sector commitment, reflecting the early but severe implementation of Resolution 68.

Vietnam’s Strengthening State Budget Underscores Economic Discipline

A clear sign of Vietnam’s determination to transform its economy is the remarkable improvement in its state budget balance. As highlighted in previous reports, the country has shifted from decades of persistent deficits—dating back to the 1990s—to generating surpluses in both 2024 and 2025. Since General Secretary To Lam assumed leadership, the government has embraced a more open yet disciplined economic approach, with a strong focus on boosting state revenue. According to the General Statistics Office (GSO), Vietnam recorded a significant budget surplus of VND 207 tn in 2024, followed by an even more substantial surplus of VND 306 tn in the first five months of 2025. This robust fiscal position enables the government to pursue major national initiatives, including the ambitious USD 67 bn North–South high-speed railway project.

Explaining Vietnam’s current transformation to international investors is challenging because nothing like it has ever happened before. While concerns over U.S. tariffs are valid and could temporarily slow growth, they will not derail the economy. Vietnam has established deep trade ties with over 10 strategic comprehensive partners and maintains free trade agreements with major economic blocs, including the EU (EVFTA), the UK (UKVFTA), BRICS, and CPTPP. Any export losses due to higher U.S. tariffs can be gradually offset through these channels.

More importantly, Vietnam is undergoing what our CIO calls a true “economic liberation.” Resolution 68 marks a historic shift: empowering the private sector as the core engine of national growth. For decades, private enterprises have driven economic output but lacked institutional support. Now, with this resolution, Vietnam is creating the legal and financial infrastructure to unleash its potential fully. If successfully implemented, this could lift GDP growth to 7–10% annually over the next decade. That’s why we believe Vietnam is no longer just growing — it's transforming.

At the end of June 2025, the fund’s largest positions were: Lam Dong Minerals and Building Materials (8.4%) – a building material supplier, Agriculture Bank Insurance (7.3%) – an insurance company, Thien Long Group (6.1%) – a manufacturer of office supplies, TNG Investment and Trading JSC (5.9%) – an apparel manufacturer, and Dong Hai JSC of Bentre (5.2%) – a packaging manufacturing company.

The portfolio was invested in 38 names and held 6.9% in cash. The sectors with the largest allocation of assets were consumer (37.5%) and financials (31.2%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 10.38x, the estimated weighted harmonic average P/B ratio was 1.33x, and the estimated weighted average portfolio dividend yield was 4.08%. The fund’s portfolio carbon footprint is 1.79 tons per USD 1 mn invested.

 AFC Asia Frontier Fund - Manager Comment

The AFC Asia Frontier Fund (AAFF) USD A-shares returned +1.9% in June 2025 with an all-time high NAV of USD 1,992.85. The MSCI Frontier Markets Asia Net Total Return USD Index returned +3.8%, while the MSCI Frontier Markets Net Total Return USD Index went up by +5.5%, and the MSCI World Net Total Return USD Index increased +4.3%. Year to date, the fund has delivered a +4.2% return. The performance of the AFC Asia Frontier Fund A-shares since inception on 30^th March 2012 now stands at +99.3% versus a negative performance of 12.0% for the MSCI Frontier Markets Asia Net Total Return USD Index during the same period, showing an outperformance of +111.3% since inception. The fund’s annualised performance since inception is +5.3%. The broad diversification of the fund’s portfolio has resulted in lower risk with an annualised volatility of 10.3% and a correlation of the fund versus the MSCI World Net Total Return USD Index of 0.49, all based on monthly observations since inception.

It was another stable and positive month for the AFC Asia Frontier Fund, in line with our expectation of a pick-up in momentum in our Asian frontier markets towards the second half of 2025, with both May 2025 and June 2025 reporting strong performance for the fund. Gains in June were led by Sri Lanka, Kazakhstan, Georgia, Bangladesh, Uzbekistan, and Vietnam. The main negative contributors to performance were Iraq, Pakistan, and Mongolia.

Our on-the-ground visit to Sri Lanka in June further cemented our positive outlook for the country as the robust economic rebound is backed by political stability, and this confidence was reflected in the meetings with policymakers and companies we had during our visit. We witnessed confidence in management comments across sectors, including banking, consumer, construction, and tourism.

Not surprisingly, GDP growth in 1Q 25 came in strong at +4.8% led by the manufacturing and services industries. With a stable political and economic platform, we expect economic growth to remain solid over the next two to three years. Therefore, Sri Lanka remains one of our top country picks, with the market still trading at valuations that are well below pre-crisis levels.

Sri Lanka GDP Growth Remains Robust

P/E Ratio of the Sri Lanka Colombo All Share Index is Still Below Pre-Crisis Levels

The Dhaka Broad Index in Bangladesh witnessed a rally after many months and gained +4.3% in June. This does not come as a surprise, as valuations for the market are at multi-year lows. Positive catalysts are potentially in place including parliamentary elections which may occur in the first half of 2026, and important macro-economic indicators like the current account, foreign exchange reserves, and inflation are all showing improvement.

Bangladesh Valuations are at Multi-Year Lows and Positive Catalysts are Potentially in Place

The best-performing indexes in the AAFF universe in June were Laos (+14.1%) and Kazakhstan (+8.2%). The poorest-performing markets were Iraq (−4.8%) and Mongolia (−0.7%). The top-performing portfolio stocks this month were a nickel miner in Vietnam (+21.3%), a Mongolian gold miner (+18.3%), a manganese producer in Timor-Leste (+18.2%), a Sri Lankan glove manufacturer (+14.7%), and a Kazakh mining company (+13.4%).

In June, the fund purchased a Sri Lankan conglomerate focused on the beverage industry and exited each a cement producer and a hotel operator in Sri Lanka. The fund also exited an aluminium can producer in Pakistan and added to and reduced existing positions in Mongolia.

At the end of June 2025, the portfolio was invested in 55 companies, 2 funds, and held 5.4% in cash. The two biggest stock positions were a cement producer in Pakistan (4.1%) and a bank in Kazakhstan (4.0%). The countries with the largest asset allocation were Pakistan (16.4%), Sri Lanka (12.9%), and Uzbekistan (10.4%). The sectors with the largest allocation of assets were financials (34.0%) and consumer goods (20.7%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.35x, the estimated weighted harmonic average P/B ratio was 1.28x, and the estimated weighted average portfolio dividend yield was 3.84%. The fund’s portfolio carbon footprint is 0.22 tons per USD 1 mn invested.

AFC Uzbekistan Fund - Manager Comment

The AFC Uzbekistan Fund Class F shares returned +1.7% in June 2025 with a NAV of USD 1,264.60, bringing the year-to-date return to +0.7% and the return since inception (29th March 2019) to +26.5%.

During the month of June, market activity on the Tashkent Stock Exchange continued to improve relative to May 2025, and certainly when compared to the 2022 to 2024 period, when the market saw continued downward pressure after its initial re-rating. We are now consistently being approached by institutional investors several times each month seeking to learn about the market and considering opening accounts to begin investing. Furthermore, we are visibly seeing an expansion in market depth of individual equities (specifically in our top holdings) with consistent bids for shares, which also happen to be rising as share prices move higher. Additionally, as new foreign capital enters the market, these new investors are looking to secure blocks of shares and brokers are reaching out to us asking if we want to sell our entire holdings in certain names, to which our response is a resounding “no thanks!”, as equity valuations and growth prospects remain in our view far too cheap. This is what we have been expecting to happen in the market as more foreigners catch wind of Uzbekistan’s economic transformation, and that is why we concentrated the AFC Uzbekistan Fund’s holdings in the “blue-chip” names listed on the exchange, since we believe they will be the first to benefit from a rise in liquidity.

The market appears to be in a slow but steady start on its next leg higher, after a three-year correction. We are looking forward to IPOs of state-owned enterprises slated for privatisation, which are planned to start in the fourth quarter of 2025 and which should dramatically increase visibility of the Uzbek capital market to foreigners. This process should also attract Uzbeks to open tens of thousands of brokerage accounts as they will be able to participate in the IPOs at a slight discount to what foreign investors will be offered, providing an attractive incentive to get involved in owning some of the country’s “crown jewel” companies. In due course, this will also hopefully accelerate retail participation in the market.

Beyond visibly seeing the market structure change over the past several months, as we are active on a daily basis and seeing new money enter the ecosystem and move prices higher, during June, broader Uzbek news flow was fairly quiet.

From 9^th to 12^th June 2025 the Tashkent International Investment Forum was held in the capital. However, while there were many memorandums of understanding signed between Uzbekistan and governments of multiple countries, China most notably, as well as various regional sovereign wealth funds finalising deals on projects, this annual forum is more a marketing exhibition to attract foreign eyes to the country. The turnout was strong and it will be interesting to see what potential deals and partnerships Uzbekistan announces in the coming months as its gravitational pull, being the most important Central Asian country (geostrategic, population, militarily, and in due course economically) only continues to grow.

At the end of June 2025, the fund was invested in 23 names and held 12.5% in cash. The portfolio was allocated to Uzbekistan (87.4%) and Kyrgyzstan (0.1%). The sectors with the largest allocation of assets were financials (44.9%) and materials (20.6%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 3.56x, the estimated weighted harmonic average P/B ratio was 0.61x, and the estimated weighted average portfolio dividend yield was 1.92%.

AFC Iraq Fund - Manager Comment

The AFC Iraq Fund Class D shares returned −2.8% in June 2025 with NAV of USD 2,182.14, outperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which lost 4.8% during the month. The fund gained 43.5% in 2024 on the back of a stellar performance in 2023 of +110.4%. The fund is up by 6.3% for the year versus down by 1.1% for the index. Since inception, the fund has gained 118.2% while the RSISUSD index is up by 48.3%, an outperformance of 69.9%. The annualised return since inception of the fund stands at +8.1% p.a.

The AFC Iraq Fund, Then and Now

The AFC Iraq Fund is up 118.2%, while its benchmark is up 49.6%, since its inception on 26^th June 2015, a year after it was conceived amidst the perfect storm of ISIS’s take-over of the city of Mosul, threatening Iraq’s breakup, and the crash in oil prices piling on the misery by adding its potential bankruptcy in the process. It seems almost fitting that, yet another perfect storm was marking its ten-year anniversary, in which the Israel-Iran war, brewing for over 18 months, risked igniting a much-feared wider regional war that could have engulfed Iraq. However, unlike then, the storm dissipated in 12 days, or at least for the time being, as both antagonists have sought ways to end it, that seems to have been found through a U.S. mediation made possible by an orchestrated and symbolic attack on an empty U.S. military base and sealed in a theatrical ceasefire announcement. 

However, while the risks of the Israel-Iran war erupting once again are real, Iraq and its economy are very different from ten years ago, helping it to weather the war’s worst consequences, and to continue with its economic transformation. As discussed here over the last few years, especially in the outlook for 2025 in “What Next After Two Gangbuster Years?” Iraq’s economy is undergoing a long-term economic transformation brought on by two key dynamics, which are in the early stages of driving this transformation. The first of which is the cumulative positive effects of the relative stability that the country has enjoyed over the past few years, that provided a stable and predictable macroeconomic framework for businesses to operate in and to plan for capital investments on a scale not seen in the prior decades. While the second is the significant structural fundamental developments accelerating the adoption of banking and bringing about a transformation of the sector and its role in the economy.

Iraq’s equity market’s performance has mirrored the country’s tribulations and its ongoing transformation, in which its pre-ISIS peak in January 2014, was followed by a brutal seven-year bear market with the RSISX USD Index down 25.4% in 2014, 22.7% in 2015, 17.4% in 2016%, 11.8% in 2017, 15.0% in 2018, 1.3% in 2019, and 5.4% in 2020 – for a cumulative decline of 66.6%; followed by a recovery of 21.4% in 2021, a decline of 3.8% in 2022, an increase of 97.2% in 2023, and a further increase of 44.8% in 2024. Underscoring the early stages of the market’s recovery, is that the RSISX USD Index only surpassed its 2014 peak over a decade later in October 2024.

Rabee Securities U.S. Dollar Equity Index

Iraq, as seen Through a Visitor’s Eyes

As mentioned last month, Thomas Hugger visited Iraq at the end of May, and with me, embarked on a tour of the country that included business visits to companies such as the Bank of Baghdad (BBOB), and Baghdad Soft Drinks (IBSD), the Iraq Stock Exchange (ISX); cultural tours starting with Baghdad’s old districts (Mutanabbi Street, Mustansiriyya Madrasa, Al-Shawaka), and its modern districts; the ancient cities of Babylon, Ctesiphon, Ur; the Marshes; the meeting point of the Tigris and Euphrates rivers forming Shatt Al Arab at Al-Qurnah,; and Iraq’s third largest city Basra. This month’s report will review our visit to the ISX, the Bank of Baghdad, and focus on one of Iraq’s best consumer companies, Baghdad Soft Drinks, and its state-of-the-art production plant, the largest of its kind in the Middle East.

This was Thomas’ first visit to Iraq, 13 years after AFC started investing in the country. Arriving in Baghdad at 00:30 in the early morning, he was greeted by the driver of “Al-Mosafer Taxi”, who took him to a hotel in the neighbourhood of Arasat Al Hindia, in Karada. For Thomas, having just concluded an investor tour in Uzbekistan, arriving on Turkish Airlines from Istanbul, the experience was no different than almost any country among AFC’s investable universe that he has travelled to, in such a contrast to the usual Iraq travel advice warnings of the dangers, that are still reflecting Iraq’s dark days of conflict that ended years ago. Thomas notes: “Airport immigration was relatively quick and simple: Most foreigners can now apply for an E-visa online and just before going to the immigration counter simply pick up their visa after the helpful staff at the E-visa counter take their mugshots. The airport is still tiny for such an economy, and I assume that a new passenger terminal will be added in the future. I was also impressed by the quality of the brand new three-lane highway leading from the airport to the city centre of Baghdad. Despite the late time of 01:30 am, there was still some traffic. Judging from the style of driving, I would not be surprised that a future Formula-1 driver will be coming soon from Iraq! The emotional and visual highlight though was the crossing of the Tigris River which splits Baghdad into its western part, Karkh, and its eastern part, Rusafa.”

The next day, we visited the Iraq Stock Exchange (ISX), situated in the Alwiya area in Karada, in Rusafa, which fortunately happened to be the last trading day of the month, as it allowed us to watch the market’s close on the floor of the exchange, after a meeting with the CEO of the Stock Exchange. With the advent of electronic trading in 2009, most investors migrated from watching and trading at the exchange to brokers’ offices. However, old habits die hard, and a number of regulars still come to the exchange’s floor to meet, gossip, and trade. We had the opportunity to chat with some of them and joined them like two old timers fixated on the trading screens.

At the Iraq Stock Exchange (ISX)

May ended on a strong note with heavy activity in some of the leadings stocks such as Asiacell Communications (TASC), Baghdad Soft Drinks (IBSD), Bank of Baghdad (BBOB), Mansour Bank (BMNS), and the National Bank of Iraq (BNOI), in which the five accounted for over 90% of the trading value on the last day of the month – the day ended up among the highest turnover days of the year, at over one and a half times the year to date’s average daily trading value. These five companies’ market leadership stems from the high quality of their business models, quality of management, and multi-year earnings growth, especially over the last two years, as highlighted last month. Obviously, all five companies are part of the top holdings of the AFC Iraq Fund.

Afterwards, we left to visit the Bank of Baghdad, but not before visiting the beautiful Church of Our Lady of Salvation, which is located right across the street from the stock exchange. Our Lady of Salvation is an Assyrian Christian Church that survived terrible attacks during Iraq’s darkest years of civil war, particularly the attacks in 2004 and 2010. In 2010, there was a twin attack that started at the ISX and was followed by another at the Church with an attack at Sunday Mass. The attackers clearly aimed for maximum damage as Sunday is also the first day of the business week, and so the death toll was 52 worshippers at the church, and four guards at the ISX. In a spirit that is typical of Iraqis, the ISX family went to work the next day as if nothing had happened.

The Church of Our Lady of Salvation

Bank of Baghdad’s Head Office

We met Bank of Baghdad’s outgoing CEO, who successfully managed the bank’s turnaround from mid-2016, and its resumption of growth as highlighted in “Banks and the Predictability of Earnings”. After discussing the banking scene in Iraq, he introduced us to the incoming CEO, who shared his strategic plans for the development of the bank in the near future. Afterwards, we had lunch at one of the best grill houses in Iraq, Zarzour on the National Theatre roundabout, and enjoyed a feast of kebab, tikka, liver, hearts and kidneys. Iraqi red meat grills are almost always made of domestic lamb, which are accompanied by high amounts of fat: kebabs have up to 20% of fat content; tikka, liver, hearts and kidneys come with cubes of fat; and for those who want more, restaurants serve skewers of fat cubes as a stand-alone item.  Local sheep breeds are mostly Awassi, followed by Arab and Hamdani sheep, which are broad-tailed breeds with fat tails – they are so prized that successive governments have prohibited their export.

Lunch at Zarour, the National Theatre Roundabout

In the evening, we went on a walkabout on one of the liveliest streets in Baghdad, Yarmouk district’s “Four Streets”, in the Karkh side of Baghdad. Being a Thursday, which is the last of the Iraqi work week, it was full of people, of all walks of life, brimming with energy, movement and whose lively conversations filled the space. Not satisfied with just one grilled meat feast a few hours earlier, we enjoyed another tasty grilled dinner, repeating the same choices, in one of the many restaurants left and right of the buzzing street where entire families walked by or drove in their SUVs, most of which were brand new.

Four Streets, Yarmouk, Karada, Baghdad

On Baghdad, Thomas notes: “I noticed that the western part of the city is seeing a lot of construction activity since I assume this part is newer and was therefore less developed a few years ago compared with the eastern part of the city which is very crowded and overbuilt with mostly two to three stories buildings and hosting the older residential and commercial aeras including the historical centre “Olds Rusafa” which is dating back over 1,000 years. I had the feeling that the construction boom and urbanisation of Baghdad were just starting. I was impressed by some huge mixed property developments (residential combined with retail space) – something which could be easily also found in any other place like in the U.A.E., Kuwait, or Qatar. The traffic early in the morning was easy, but later in the day became much more congested, leading to traffic jams into the evening hours (or early morning the next day). It was striking for me that most of the cars seem to be quite new (with the exception of the many yellow taxis) and also that the Dodge “Challenger” is used as a family car in Iraq and seems to be very popular with the local drivers. I was also surprised to learn that the gasoline price in Iraq is about USD 0.65 (850 IQD), which is certainly much cheaper than in Europe, but considerably higher compared with other oil-producing countries.”

Construction Activity in Baghdad

The tour of Iraq’s last day ended in Baghdad, with a visit to Baghdad Soft Drinks’ (IBSD) head office and its world-class production plant in Al-Za’franiya on the outskirts of Baghdad, which is the largest and best of its kind in the Middle East. IBSD is Iraq’s main PepsiCo franchise and has grown organically by expanding the Pepsi Cola line, and strategic acquisitions such as that of the Aquafina (mineral water) licence holder “Ynabee' Al Zawraa Company”. As of 2024, IBSD had 15 Pepsi production lines, three Aquafina water production lines, and five juice production lines, with total production growing by about 14% year over year. Complimenting these, were milk products that were introduced in 2024, and a refrigerated hall for milk storage was completed, that while an insignificant part of IBSD’s business, nevertheless, Rabee Securities notes that is “… a positive development supporting the expected growth in milk sales” – much like in the rest of the Middle East, fresh milk consumption is on the rise.

IBSD’s consistent earnings and revenue growth since 2011, were negatively affected twice in these years. The first business decline was in 2014, following the fall of Mosul and the ensuing conflict, but growth soon resumed in 2015. The second was in 2021-22 when its profit margins took a hit from the significant price rises of commodities, in particular aluminium cans and sugar, as brought on by the double whammy of the disruptions to supply chains in the wake of the emergence from Covid-19’s induced lockdowns, and of the invasion of Ukraine. These higher expenses, while negatively affecting profit margins, were temporary and one-off in nature, the high year-over-year cost increases moderated significantly and eventually declined; while sales momentum continued to accelerate supported organically by its strong product line-up, as well as by the line-ups from is recent acquisitions – a point made in “Winter Flash Floods” when discussing IBSD, and other top companies following their sharp prices drops in late 2021. The consequences of the cumulative positive effects of the relative stability that the country enjoyed is evident in the acceleration in growth of the last two years. The company’s confidence about its future was evident in its latest dividend declaration, at the end of June 2025, in which it increased the cash payout from 0.29 to 0.36 IQD per share, or an increase of 24.2%, resulting in a dividend yield of 7.5%.

IBSD’s Revenues and Earnings Margins 2011-2024

What is remarkable, and part of the attractiveness of the Iraq investment story, is that despite the market’s strong performance over the last few years, valuation disparities continue to offer investment opportunities.  A case in point is IBSD’s valuation disparity with emerging market PepsiCo, and Coca-Cola bottlers (table below) as an example of Iraq’s value proposition, and a demonstration of AFC’s investment thesis of arbitraging the delta between Iraq’s real risk and perceived risk – while a disparity should exist given different market sizes, and other market dynamic differences, yet surely not on such a scale.

Table: Bottler Comparisons

On the company, Thomas notes: “We were able to visit the impressive and plant of Baghdad Soft Drinks in Al-Za’franiya on the outskirts of Baghdad. The plant manager showed us around various buildings where Pepsi, mineral water, and other soft drinks were produced and packaged. The bottling lines did not differ from any soft drink bottling plant in a developed country. Almost all of the machinery was from Germany and hardly any people were doing manual work (except for the forklift drivers moving around the huge piles of bottles or cans) since most of the jobs are computerised or done by robots. Needless to say, the factory was spotlessly clean. We also saw workers from Turkey installing the newest machinery from Germany for the new production lines”.

IBSD Production Plant

We were taken there by Wassim Al Jzrawy, the CEO of Karmal Brokerage, a colleague and a friend with whom my relationship goes back to 2013, when I first started working on the Iraq investment thesis. The visit continued thereafter by touring through Ishtar Sheraton Hotel, sandwiched between the picturesque Tigris River, and “Firdos Square” which became world famous on 9^th April 2003 when the toppling of Saddam Hussein’s statue at that time was shown live on CNN. The hotel is currently undergoing a major refurbishment to meet the strong demand for hotel rooms in Baghdad, as the country’s stability, subsequent rebuilding and its booming economy are attracting foreigners, particularly regional businesses investors seeking economic opportunities – or “Go East, young person”, a modern day version of “Go West, young man” in the U.S. in the 19^th century, that embodied the massive economic opportunities during the westward expansion in the U.S. So much so, that planes arriving today in Baghdad from Amman, Istanbul, Dubai, or Doha, (some of which have multiple daily flights now), are normally full irrespective of the time of arrival. Increasingly, the inflow of tourists, with the potential economic implications to cater for them, is taking place, as I will write about it in the travel reports of our tour of historic Iraq.

View from Ishtar Sheraton Hotel

Firdos Square, Karada, Baghdad

At the end of June 2025, the AFC Iraq Fund was invested in 8 names and had a cash level of 7.0%. 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 (91.5%), Norway (1.3%), and the U.K. (0.2%).

The sectors with the largest allocation of assets were financials (67.3%) and communications (15.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.62x, the estimated weighted harmonic average P/B ratio was 1.97x, and the estimated weighted average portfolio dividend yield was 7.64%. The fund’s portfolio carbon footprint is 0.05 tons per USD 1 mn invested.

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With kind regards,

Thomas Hugger
CEO & Fund Manager

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