“There are two kinds of forecasters: those who don't know, and those who don't know they don't know.”

– John Kenneth Galbraith - Canadian-American economist, diplomat, public official, and intellectual.

Even though it was a tumultuous month for global equity markets, the AFC Iraq Fund and AFC Uzbekistan Fund reported a positive performance for March, which once again reflects the diversification benefits that Asian frontier markets offer.

Our AFC Asia Frontier Fund and AFC Vietnam Fund corrected during the month as uncertainty in the Middle East created nervousness amongst investors in Vietnam and our other markets like Bangladesh, Pakistan, and Sri Lanka.

With a two-week ceasefire agreed by the U.S. and Iran to carry out negotiations, we are likely to see many of our Asian frontier markets rally in the near term, especially Bangladesh, Pakistan, Sri Lanka and Vietnam, as these four markets have corrected the most since the conflict began given their high dependence on energy imports.

Though events in the Middle East remain uncertain, a key point to note is that the net energy-importing countries in our universe, such as Bangladesh, Pakistan, Sri Lanka, and Vietnam, are in a significantly stronger macroeconomic position compared to the previous commodity price shock faced by these countries in 2022 when the conflict in Ukraine broke out. Furthermore, in the case of Bangladesh, Pakistan, and Sri Lanka, these countries’ foreign exchange reserves, current account balances, and inflation are in a much more robust position compared to 2022. In addition to this, all three countries are in an IMF (International Monetary Fund) program, which makes them committed to stability – something which was missing in 2022. Additionally, Bangladesh, Pakistan, and Sri Lanka all had parliamentary elections in the recent past, leading to much more stable and stronger governments.

Our AFC Asia Frontier Fund also has exposure to countries that benefit from higher commodity prices, such as Iraq, Kazakhstan, Mongolia, Oman, and Papua New Guinea, while also having exposure to countries that are not significantly impacted by the conflict such as Georgia and Uzbekistan. Hence, the AFC Asia Frontier Fund has a balanced exposure across our country universe.

We believe that any further de-escalation in the conflict beyond the two-week ceasefire will lead to a continued re-rating in our stock markets, especially in Bangladesh, Pakistan, Sri Lanka, and Vietnam, as these markets have taken the biggest hit and would benefit the most from any continued de-escalation.

Valuations have also now opened up in our markets, especially in the case of Pakistan, where the conflict in the Middle East is clouding out the macroeconomic recovery story, and we would not be surprised if Pakistan posts a stronger stock market recovery relative to our other markets in the event of lower tensions in the Middle East.

Valuations in Pakistan Have Opened Up – De-Escalation in the Region Should Re-Rate the Market

AFC Asia Frontier Fund Wins 2026 Best of the Best Award

We are delighted to announce that our AFC Asia Frontier Fund received Asia Asset Management’s Best of the Best Award in the “Frontier Markets” category for best performance over three years with an annualised return of 23.4%. Peter de Vries, Marketing Director at AFC, accepted the award on behalf of AFC from Tan Lee Hock, founder and publisher of Asia Asset Management, at a celebratory awards dinner ceremony at the Four Seasons Hotel in Hong Kong. This award is a meaningful industry recognition that reflects our long-term commitment to uncovering high-quality opportunities in some of the world’s most dynamic frontier economies and delivering disciplined, research-driven performance for investors. It is a proud moment for the firm and a fitting recognition of the excellent work of AFC fund managers Thomas Hugger and Ruchir Desai, together with the broader AFC investment team.

Ruchir Desai on Marketing Trip to the U.S. in May 2026

Ruchir Desai, Co-Fund Manager of the AFC Asia Frontier Fund, will be visiting the U.S. from 16^th-29^th May 2026 to meet with and update existing and potential investors.

The AFC Asia Frontier Fund has returned +76.7% in the last three years and the fund’s key markets are perfectly positioned for a post-conflict rally given their attractive valuations and stable fundamentals.

The AFC Iraq Fund has returned 175.6% in the last three years while the AFC Uzbekistan Fund is up +27.9% in 2026. The AFC Asia Frontier Fund has exposure to both Iraq and Uzbekistan via the above funds without an additional layer of fees.

If you would like to meet with Ruchir in the U.S. to discuss our AFC Asia Frontier Fund, AFC Iraq Fund, or AFC Uzbekistan Fund, please email him on This email address is being protected from spambots. You need JavaScript enabled to view it. or the team at This email address is being protected from spambots. You need JavaScript enabled to view it.

April 2026 Subscription Cut-Off Date

The next cut-off date for subscriptions for our funds will be 24^th April 2026. 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 March 2026.

AFC in the Press

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 Uzbekistan Fund - Manager Comment

The AFC Uzbekistan Fund Class F shares returned +3.5% in March 2026 with a NAV of USD 1,934.02, bringing the year-to-date return to +27.9%. The return since inception (29^th March 2019) now stands at +93.4%, representing an annualised return of +9.9% p.a.

War and its impact on Uzbekistan

We have written many times in our updates over the past few years that the world is entering a multi-polar world, and that focusing on import substitution, supply chain resiliency, and control over their natural resources is of paramount importance. Many countries, however, continue to believe that relying on just-in-time inventory, outsourcing supply chains internationally, having a core focus on renewable energy and liquified natural gas imports (LNG) in lieu of domestic coal, nuclear, and gas when possible, and refusing to exploit domestic resources is somehow a smart option. Those countries are set to continue facing impediments to their GDP growth and sustaining their middle classes over the coming years. Meanwhile, Uzbekistan thrived, continues to do so, and is well-positioned among most other countries to continue seeing robust topline GDP growth, industry diversification, and the expansion of its middle class, not without the customary growing pains of any frontier market, of course.

So, where does Uzbekistan stand and how hard will the country's economy get impacted by this energy supply shock and inflationary jolt which is already underway (as many of us see in airfares, as well as petrochemical companies around the world already raising prices by double-digits)? Luckily for Central Asia, hydrocarbons, which are not produced in the region, are coming from Russia. Uzbekistan is no longer self-sufficient in natural gas production due to its booming economy and therefore imports some Turkmen and Russian gas, while crude oil and refined petroleum products are imported from Russia. While energy prices have obviously risen, Uzbekistan typically has multi-month to one-year-long contracts with Russia, so it won’t be impacted immediately by price. Even when prices adjust, they will still have a steady supply of energy, which can’t be said for Asia or Europe if the war goes on long enough. The bigger question for Uzbekistan is, as of 1st April 2026, Russia is halting gasoline exports until 31st July 2026 to ensure sufficient domestic supply after Ukraine has struck several refineries and petroleum depots during the month. This will certainly have a moderate impact on Uzbekistan, but there is ample domestic and regional supply to fill any void, as Uzbekistan has experienced such export bans by Russia in the past due to shortages without causing much negative impact.

Uzbekistan will likely be hardest hit in terms of logistics, since the country has a key transport corridor through Turkmenistan, into northern Iran and over to Turkey for exports to Europe. Further, Uzbekistan uses the Iranian port of Bandar Abbas, situated on the Persian Gulf, for imports of grains (such as soybeans from Argentina) and palm oil from Malaysia, etc. Workarounds will naturally be found, whether importing via Russia/Kazakhstan, trucking some of these products from Pakistan, or using the Caspian Sea to move goods from the Caucasus to Kazakhstan or Turkmenistan and then onward to Uzbekistan.

Another potential impact on the country is that of inflation. No one globally is going to be able to escape the inflationary impulse that comes out of this war. However, we have been hearing rumblings among Tashkent finance circles that there is the potential over the coming months for the Central Bank of Uzbekistan to lower the policy rate from 14% to the 13%-13.5% range due to the country’s current single-digit inflation rate of ~7%. We have already seen some Uzbek som bank deposit rates fall below 20% which gives further confidence in a rate cut (which is obviously positive for the Uzbek stock market). However, based on the new environment we now live in, we would expect the policy rate to stay at 14% until more clarity is available on the Middle East and the respective energy flows impact on domestic inflation.

Thus, it’s abundantly clear that Central Asia is not a bad neighbourhood to be in, in regard to stability and long-term growth. Uzbekistan has the arrows of a base of domestic gas and oil production (providing a partial buffer), energy infrastructure including refineries and petrochemical plants for fertiliser and plastics production, industry (steel, cement, pharmaceuticals, white goods, consumer electronics), and agricultural production in its quiver to insulate itself. It further has roughly USD 67 billion in Central Bank gold holdings and some of the world's largest gold reserves underground, which will allow it to generate hard currency as needed, and more importantly, be very well positioned for the further move by sovereigns into gold coming through the other side of this crisis. We remain pragmatically bullish on the country.

Uzbekistan National Investment Fund

As we’ve written about over the last half-year, Uzbekistan is preparing to dual list the Uzbek National Investment Fund (UzNIF) on the Tashkent and London Stock Exchanges later this year. We hope to have receive more details in the late April / early May timeframe about the listing. As things progress with teeing up the IPO, the holdings of the company have slightly changed. Previously, there were 15 investments, and that has now decreased to 13. This restructuring involved an asset swap where UzNIF transferred its 25% stake in NavoiAzot, the largest petrochemical complex in the country, and a 30% stake in Xalq Bank to the Ministry of Economy and Finance. In return, UzNIF saw respective increases in holdings of 30% in O'zbektelekom (+5%), 40% in O'zbekinvest (+5%), and 40% in Uzpromstroybank (+10%). Having seen such an instance of this late last year, where the holdings of UzNIF were restructured, we are hopeful this is the final re-shuffling and will now be fixed going into the IPO.

AFC Uzbekistan Tour 2026

AFC is planning to host its 5^th AFC Uzbekistan Tour, bringing existing and prospective investors to experience the reality of Uzbekistan from the ground. We will be hosting a day tour in late September 2026. This will include a half-day tour of Tashkent, a visit to several of the fund's portfolio companies, followed by dinner. If you are interested in attending, please write us at This email address is being protected from spambots. You need JavaScript enabled to view it. to express your interest and we will follow-up with you.

At the end of March 2026, the fund was invested in 23 names and held 10.8% in cash. The portfolio was allocated to Uzbekistan (89.17%) and Kyrgyzstan (0.04%). The sectors with the largest allocation of assets were financials (59.35%) and materials (17.71%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 5.53x, the estimated weighted harmonic average P/B ratio was 0.92x, and the estimated weighted average portfolio dividend yield was 3.06%.

AFC Iraq Fund - Manager Comment

The AFC Iraq Fund Class D shares returned +2.9% in March 2026 to an all-time high NAV of USD 2,497.99, outperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which gained 2.6% 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 4.1% for the year versus the index, which went up by 3.2%. Since inception, the fund has gained 149.8% while the RSISUSD index is up by 75.9%, an outperformance of 73.9%. The annualised return since inception of the fund stands at +8.9% p.a.

The icing on the cake for the market’s all-time closing high was Iraq’s 2-1 win over Bolivia on 31^st March, to secure the country’s qualification for the 2026 World Cup for the first time in 40 years. The win after a gruelling qualification journey, with 21 games in 28 months, and the ongoing war, was in typical Iraqi fashion, celebrated throughout the country with crowds filling the streets and public spaces. Not wishing to miss out on the celebrations, the government announced a two-day public holiday on 1^st and 2^nd April. The team’s individual stories, mirroring the country’s long conflict filled history, were encapsulated by the scorer of the opening goal in “I don’t think people understand how much we’ve been through as a country and people,” in an interview to the NYT’s Athletic section.

Iraqis Celebrating the Win in Baghdad’s Kharada District

The market’s action throughout March was similar to that of February, with prices ticking-up higher as the war raged on –by the end of the second week of the month, the market erased its early minor losses after the war’s start, that at worst were a decline of 3.2% from February’s close. Moreover, the selling was easily matched by buying interest, and was clearly not that of panic selling, or that of selling driven by expectations of a war that is devastating for Iraq. Also, similar to February’s price action, was the 22.1% month-over-month increase in the average daily traded value. From a technical analysis perspective, the market’s action continues to be that of consolidating its three-year gains, and that a continued consolidation or a pull-back should be within its multi-month uptrend (chart below).

Rabee Securities U.S. Dollar Equity Index and Daily Turnover

The action of the Iraqi dinar (IQD)’s parallel market exchange rate against the U.S. dollar (USD) continues to be in line with that of the equity market. As explained a couple of months ago, the delta of the parallel market exchange rate over the official exchange rate has been increasing since mid-December due to domestic reasons related to the government’s implementation and automation of customs tariffs. Driving the increase was greater demand for the USD in the parallel market that essentially came from two sources. The first from the still informal section of importers who faced difficulties in effecting cross-border transfers at the official exchange rate. The second was due to the mechanics of the implementation and automation of customs tariffs, which included two significant changes: (1) replacing a flat-fee structure with a value-based tariff structure –legislated in 2010 but only implemented at start of 2026; and (2) linking cross border-transfers at the official exchange rate with the automated custom tariffs’ system. As such, to avoid the resultant higher custom tariffs on certain items, some importers sought USD in the parallel market. These demand sources, drove the delta higher from mid-December 2025, which continued increasing until early-March, after which it went sideways. The sideways action could be because the market is adjusting to the new system or due to the government’s recent actions to ease the transition to the new system, or more likely because of declining demand for imports due to the closure of the Strait of Hormuz. However, the key observation is that is there is no evidence of panic demand for USD by Iraqis, given its safe haven status, as the war raged on.

Dinar Parallel Market Exchange Rate vs. the Dollar and its Delta Over the Official Exchange Rate

Complementing the actions of the Iraqi equity and currency markets are market expectations for future oil prices, as measured by Brent Futures contracts. These, while continuing to signal expectations for a near-term resolution to the conflict much as they did after the onset of the war, however, “near-term” and “resolution” have stretched and morphed as the war escalated. This is because the paper oil markets are beginning to reflect the physical markets and the significant disruption to global supplies of crude and refined crude products from the closure of the Strait of Hormuz, and from the damage to crude production and refining infrastructure. While early days, it’s becoming clearer by the day that a near term resolution or ending of hostilities will ease but not end the disruptions to global supplies, which will take months before returning to pre-war levels, if they ever will. Crucially, the war and the subsequent ease of the closure of the Strait have exposed the vulnerabilities of one of the world’s major energy sources. This thus places a premium to energy prices, as reflected in the evolution of expectations for future oil prices during the war’s first month (chart below: grey line, followed by blue, purple, and orange lines). These evolving expectations are very different in scope and shape from those that prevailed following the invasion of Ukraine (red line in chart below), in that while immediate term expectations reached similar levels to those following the invasion of Ukraine, yet prices decline significantly over a much shorter time frame. It is too early to judge, as these could change as the war continues to rage, but they might reflect the effect of higher oil prices on demand and thus imply much weaker expectations for world economic growth.

Market Expectations for Future Oil Prices

For Iraq, the closure of the Strait of Hormuz has major implications, as it affects almost 94% of its exports (as of January 2026) with the biggest hit being to government revenues, of which oil revenues constituted 88% of total 2025 revenues. However, this hit would not be immediate, as oil revenues are normally received two to three months following their exports and so the government should be able to meet its expenditures for March, April and probably half of May. The Strait’s continued closure will hit revenues after that, nevertheless the government can still meet its expenditures beyond April or mid-May, mostly through the issuance of domestic bonds –in which the government can issue T-bills in tranches to meet monthly expenditures estimated at IQD 12 trillion a month (2025 average), but now likely to be less at IQD 10 trillion. Normally issuing bonds, in the absence of oil revenues, will have negative consequences for the country’s foreign reserves, and ultimately to the IQD’s peg to the USD –as this will increase IQDs in circulation, sustaining demand for imports and thus USDs. On the other hand, the war and the closure of the Strait will affect imports (roughly 60% of imports come from China, Türkiye and Iran), which are bound to decline, and thus the negative effects on foreign reserves will take much longer to make themselves felt. 

Promisingly, a couple of recent positive developments could alleviate pressures on government revenues. The first is the resumption of exports of 250,000 bpd through Türkiye’s Cihan port on the Mediterranean, which could yield revenues of IQD 0.9 trillion a month, assuming USD 90 per barrel (/bbl) for Iraqi oil. The second is that Iraq could benefit from Iran signalling that oil headed to friendly countries such as China and India will be given safe passage through the Strait of Hormuz. About 34.2% of Iraq’s exports went to China, and 27.6% to India in 2024 (OPEC data), which could generate revenues of IQD 7.3 trillion a month. The combination could yield oil revenues of IQD 8.2 trillion a month versus the 2025 monthly average of IQD 9.0 trillion, but will not negate the need for debt issuance for two to three months as these revenues would take such time to be received. This is a best-case scenario, but then even if 25-50% of exports to China and India make it through the Strait, and the exports through Cihan, the dynamics for the government’s financial position could change considerably for the better. In the last few days, it was reported that Iraq’s oil exports for March generated IQD 2.5 trillion in revenues, with an average Iraqi oil price of USD 105/bbl, and that Iran is formulating a protocol with Oman to regulate traffic through the Strait –and so lending a degree of credence to these positive developments. Just as this newsletter was being sent, it was reported that Iran would allow the exports of Iraqi oil through the Strait. At this stage, it’s not clear if this applies to all Iraqi oil exports, or only to those for China, India and other Iran friendly countries. Moreover, it would take time for the logistics of implementing this exemption to fall into place, and after which it would take two to three months for revenues to be received by Iraq. Nevertheless, it’s a significant positive development that lends credence to the analysis made here and to the interpretations of the markets’ logic.

The start of negotiations between the U.S. and Iran, following the announcement of a two-week ceasefire, validates the thesis put forward here last month, that the expansion of the war raised the costs of the war considerably for the world at large, and as such, raised the incentives for all concerned, direct and indirect combatants, for a quick resolution of this conflict. While a very positive development, there is a great uncertainty on the durability of the ceasefire, and on any deal thereafter, yet even with the most optimistic outcome, it would take considerable time for the logistics of the resumption of passage through the Strait to fall into place, and for oil production to resume and so forth.

While being fully cognizant of the geopolitical risks, we remain convinced that the high quality of the fund’s holdings, and their future earnings growth, will drive the fund’s performance irrespective of any volatility that the next few days and weeks might bring. The same holds for the two key dynamics, discussed here often, the cumulative positive effects of the relative stability and structural banking developments that are in the early stages of their transformation of the economy, a process that will unfold over the next few years. However, considerable risks remain, in that this “excursion” would escalate considerably beyond the control of participants, direct and indirect, and become an all-out war engulfing the region, filled with all the nightmare scenarios that are popping up in the media, by experts and “experts”, yet even these seem to be less extreme than they were a month ago.

At the end of March 2026, the AFC Iraq Fund was invested in 8 names and had a cash level of 3.6%. 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 (94.2%), Norway (2.1%), and the U.K. (0.1%).

The sectors with the largest allocation of assets were financials (65.2%) and communications (19.7%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.20x, the estimated weighted harmonic average P/B ratio was 1.92x, and the estimated weighted average portfolio dividend yield was 7.41%. The fund’s portfolio carbon footprint is 0.06 tons per USD 1 mn invested.

AFC Asia Frontier Fund - Manager Comment

The AFC Asia Frontier Fund (AAFF) USD A-shares returned −7.9% in March 2026 with a NAV of USD 2,237.33. The MSCI Frontier Markets Asia Net Total Return USD Index declined −11.9%, while the MSCI Frontier Markets Net Total Return USD Index retreated by −6.9%, and the MSCI World Net Total Return USD Index lost −6.4%. Year to date, the fund returned −2.3% and the MSCI Frontier Markets Asia Net Total Return USD Index declined −9.8% in the same period. The performance of the AFC Asia Frontier Fund USD A-shares since inception on 30^th March 2012 now stands at +123.7% while the MSCI Frontier Markets Asia Net Total Return USD Index increased +12.3% during the same period. The fund’s annualised performance over 5 years is +9.5% with a Sharpe ratio of 0.57 and a Sortino ratio of 0.73. The broad diversification of the fund’s portfolio has resulted in low risk with an annualised volatility of 10.6% and a correlation of the fund versus the MSCI World Net Total Return USD Index of 0.50, all based on monthly observations since inception.

The conflict in the Middle East overshadowed everything else during the month, with declines in the portfolio mainly in Pakistan, Sri Lanka, Vietnam, Mongolia, Bangladesh, and Georgia. However, despite the broad sell-off both in our universe and in global markets, four of the fund’s country exposures reported a healthy positive performance (Iraq, Laos, Oman, Uzbekistan).

Both our AFC Iraq Fund and AFC Uzbekistan Fund posted gains in March, which is an important signal to investors as it shows the diversification benefits of Asian frontier markets. The AFC Asia Frontier Fund gets its Iraq and Uzbekistan exposure via the above funds, but without a double layer of fees. Even though most of the stock markets in the Middle East corrected during the month, Iraq and the AFC Iraq Fund reported gains, while the AFC Uzbekistan Fund also posted gains in March, as the Uzbek economy is not as negatively impacted by the conflict in the Middle East compared to some other Asian countries and remains in a robust macroeconomic position.

Oman has been a solid performer for the fund so far this year and it appears to be emerging as a relative winner in the region. Besides Saudi Arabia, it is the only country in the Gulf Cooperation Council (GCC) which has its airspace and sea lanes still open. This is allowing it to benefit both from the transit of passengers and trade, which only adds to the ongoing positive investor sentiment towards Oman, given its ongoing economic growth and potential upgrade to MSCI Emerging Market status in the near future.

Oman Returns have Outperformed the Region Since the Conflict Began

Furthermore, Oman is viewed as neutral in the ongoing conflict and therefore it should face less economic uncertainty in the event that tensions between its neighbours and Iran continue in the foreseeable future.

The AFC Asia Frontier Fund holds three large-cap names in Oman: Bank Muscat, Omantel, and OQ Exploration and Production all of which have performed well so far in 2026. We would view any correction in Omani stocks as a buying opportunity, given that its macroeconomic position will be in a much better shape than most of its GCC peers post any de-escalation in the conflict.

Oman has Outperformed the Region Year to Date – It Faces Less Economic Uncertainty

The best-performing indexes in the AAFF universe in March were Oman (+10.5%) and Laos (+5.8%). The poorest-performing markets were Pakistan (−11.5%) and Sri Lanka (−11.2%). The top-performing portfolio stocks this month were a technology company focused on Asian frontier countries (+36.0%), a retail chain in Papua New Guinea (+23.4%), a telecommunication operator in Oman (+18.6%), a gas explorer in Mongolia (+17.9%), and an Omani bank (+14.1%).

In March, the fund initiated a new position in a Mongolian gas explorer and increased some of its existing positions in Mongolia while reducing others.

At the end of March 2026, the portfolio was invested in 63 companies, 2 funds, and held 4.3% in cash. The two biggest stock positions were a bank in Uzbekistan (5.6%) and a bank in Kazakhstan (4.0%). The countries with the largest asset allocation were Pakistan (13.9%), Uzbekistan (13.0%), and Sri Lanka (12.6%). The sectors with the largest allocation of assets were financials (38.1%) and consumer goods (17.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.25x, the estimated weighted harmonic average P/B ratio was 1.34x, and the estimated weighted average portfolio dividend yield was 4.10%. The fund’s portfolio carbon footprint is 0.19 tons per USD 1 mn invested.

AFC Vietnam Fund - Manager Comment

The AFC Vietnam Fund returned −8.6% in March with a NAV of USD 3,474.60, bringing the 2026 return to −2.1% and the return since inception to +247.5%. This month, the fund outperformed the benchmark, the Ho Chi Minh City VN Index, which lost 11.9% in USD terms. The fund’s annualised return since inception stands at +10.7% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.83%, a Sharpe ratio of 0.58, and a low correlation of the fund versus the MSCI World Index USD of 0.50, all based on monthly observations since inception.

Market Developments

The conflict between the United States, Israel, and Iran escalated sharply in late February 2026, when Israel, supported by the U.S., launched large-scale strikes on Iranian military and nuclear facilities. Iran’s retaliation against Israeli and U.S. targets has led to a direct confrontation, severely disrupting the Strait of Hormuz, the world’s most critical oil transit route. As a result, oil shipments through the Strait have reportedly fallen by nearly 70%, pushing crude prices to around USD 120 per barrel in early March.

The spike in energy prices has triggered broad inflationary pressures globally, weighing on transportation, manufacturing, and consumer sectors. Europe has been particularly affected by its reliance on energy imports, while major Asian economies, including China, India, Japan, and South Korea, are facing rising input costs and margin pressures.

Vietnam has also felt indirect effects through higher fuel prices and increased costs for imported raw materials. While diversified supply sources have helped cushion the immediate impact, ongoing Middle East tensions continue to drive global volatility.

Overall, the situation highlights the sensitivity of global growth and financial markets to energy shocks, reinforcing the importance of external risks for emerging markets such as Vietnam.

Brent Price is High but Not Record High

Investor concerns over Vietnam’s energy security have intensified amid escalating tensions in the Middle East. A potential disruption of the Strait of Hormuz poses a meaningful risk, as much of Asia, including Vietnam, relies on oil and LNG imports from this region.

Vietnam’s two main refineries, Nghi Sơn and Dung Quat, supply around 80% of domestic gasoline and diesel demand. While Dung Quat primarily processes domestic crude from the Bach Ho field, Nghi Sơn depends heavily on imported crude, particularly from Kuwait. In addition, despite having domestic gas production, Vietnam still relies significantly on LNG imports, much of which originates from the Middle East.

As a result, any prolonged disruption to energy flows could tighten supply, increase input costs, and weigh on industrial activity, transportation, and overall economic stability. These concerns have led to a sharp deterioration in investor sentiment, triggering broad-based selling and contributing to the VN-Index’s decline of -11.9% in March.

VN-Index from February 2025 to March 2026

However, Vietnam has demonstrated effective and proactive diplomatic management in navigating these challenges. Despite rising tensions in the Middle East and concerns over the Strait of Hormuz, the government moved swiftly to secure energy supply and maintain stability.

Following direct negotiations with key partners, multiple oil and LNG shipments successfully transited the Strait and arrived safely at Vietnamese ports in March 2026, ensuring uninterrupted supply to key facilities, including the Nghi Sơn and Dung Quat refineries and the Thi Vai LNG terminal.

At the same time, Vietnam has accelerated efforts to diversify its energy sources. During Prime Minister Pham Minh Chinh’s official visit to Russia in late March 2026, both countries signed strategic energy agreements. Russia committed not only to providing stable crude oil and LNG supplies and technical support for upstream development, but also to cooperating with Vietnam on the construction of nuclear power plants, marking a significant step toward strengthening the country’s long-term energy security.

Overall, these actions have effectively stabilized Vietnam’s energy supply in the near term, mitigating risks from the Middle East conflict. For investors, this reinforces confidence that recent market volatility is driven primarily by short-term sentiment rather than any structural deterioration, while highlighting Vietnam’s strong policy responsiveness and resilience in supporting sustainable economic growth.

Vietnam Positioned for Strong Growth Despite Elevated Oil Prices

Vietnam’s economy has consistently demonstrated resilience to external shocks. In 2022, despite oil prices peaking at around USD 140 per barrel during the Russia–Ukraine conflict (with an annual average of USD 110), Vietnam still delivered robust GDP growth of 8.02%. This highlights the country’s ability to withstand significant energy-related pressures.

In the current environment, although oil prices around USD 100 per barrel pose a headwind, Vietnam remains well-positioned to achieve solid growth in 2026, similar to 2025. Strong macro fundamentals, ongoing structural reforms, and proactive policy responses continue to support this outlook.

Importantly, Vietnam’s sensitivity to oil price increases is relatively moderate. According to MUFG Research, a 10% rise in crude oil prices is estimated to reduce GDP growth by around 0.2–0.4%, lower than in several regional peers such as Singapore (0.4–0.7%), Thailand (0.3–0.5%), and the Philippines (0.3–0.5%), and broadly comparable to Malaysia and Indonesia (0.1–0.3%). This reflects Vietnam’s balanced energy structure and policy flexibility.

At the same time, retail fuel prices in Vietnam remain relatively competitive within ASEAN, helping cushion the impact on consumers and businesses.

RON95 Gasoline Retail Price (USD/Litre)

Inflation Remains Well Under Control

Despite elevated oil prices, inflationary pressure in Vietnam is expected to remain contained. Nearly 40% of the CPI basket is driven by food and foodstuffs rather than energy, providing a natural buffer against oil price shocks.

Key food components are also stable. Rice prices are more sensitive to fertilizer costs, particularly urea, but Vietnam is largely self-sufficient in urea production, with major plants even exporting surplus, helping shield domestic prices from global energy-driven input costs. Meanwhile, pork prices are easing, supported by improved supply and imports, reducing pressure on another major CPI component.

In addition, the government has taken proactive measures to cushion energy costs. From 26^th March to 15^th April 2026, environmental tax on petrol, diesel, and aviation fuel has been reduced to 0%, with these products also exempt from VAT declaration and payment (while still allowing input VAT deductions). The special consumption tax on petrol has likewise been cut to 0%. These temporary measures help directly offset the impact of higher global oil prices on domestic inflation.

This resilience has been demonstrated before: even when oil prices surged to around USD 150 per barrel in 2022, Vietnam’s CPI remained moderate at just 3.15%. For 2026, inflation is projected at approximately 4–4.5%, still within the National Assembly’s target range.

Overall, strong domestic supply dynamics and timely policy support significantly limit the pass-through from higher oil prices to headline inflation, reinforcing Vietnam’s macro stability.

Meanwhile, recent market volatility has created attractive valuation opportunities, with the VN-Index trading at around 13x forward P/E, well below its 10-year average of 14.5x.

VN-Index P/E

Overall, the combination of resilient growth, moderate energy sensitivity, and discounted valuations suggests that the recent correction may offer a compelling entry point for long-term investors.

Impact of Higher Oil Prices on AFC Vietnam Fund

While higher oil prices have increased transportation and logistics costs globally and contributed to short-term market volatility, the impact on the AFC Vietnam Fund portfolio has been primarily indirect and sentiment-driven.

The portfolio is well-positioned due to its composition. Approximately 35% is allocated to financials, primarily banks and insurance companies, which are predominantly domestically driven and only marginally exposed to oil price fluctuations beyond broader macro effects. Another 18% is invested in export-oriented companies. Although these businesses face some increase in freight costs, their key markets, the U.S., EU, Japan, Australia, South Korea, and China, are not directly affected by disruptions in the Strait of Hormuz. Freight expenses account for only around 5% of their total cost base, limiting the overall impact.

Importantly, industry dynamics remain favorable. Recent discussions with Mr. Quang, CEO of Minh Phu Seafood Corp, indicate that while shipping costs have risen, order volumes are increasing as competitors in other countries face greater disruptions. As a result, the company still expects profit growth of at least 20% this year.

In addition, around 15% of the portfolio is allocated to consumer companies, which are relatively insulated from direct energy shocks, while approximately 10% is invested in infrastructure and public investment beneficiaries that continue to benefit from strong government spending.

Overall, the rise in oil prices affects the portfolio mainly through modest cost pressures rather than structural disruptions. This diversified allocation, combined with strong underlying business fundamentals, reinforces the fund’s resilience amid ongoing geopolitical volatility.

At the end of March 2026, the fund’s largest positions were: Minh Phu Seafood Corp (9.0%) – a seafood company, Agriculture Bank Insurance (7.8%) – an insurance company, Lam Dong Minerals and Building Materials (6.1%) – a building material supplier, Phu Tai JSC (5.3%) – a home and office furnishings company, and TNG Investment and Trading JSC (5.2%) – an apparel manufacturer.

The portfolio was invested in 33 names and held 7.5% in cash. The sectors with the largest allocation of assets were consumer (37.9%) and financials (36.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 8.86x, the estimated weighted harmonic average P/B ratio was 1.24x, and the estimated weighted average portfolio dividend yield was 4.32%. The fund’s portfolio carbon footprint is 1.79 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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