Dear Investors and Newsletter Readers,
From this month onward we will be sending our travel report seperately from the AFC fund manager comments. Each month, shortly after the calculation of our funds NAV's, you will receive a newsletter with the performance details and manager comments for each of our funds. Separately, on around the 20th of each month, we will send a newsletter with a travel report on a country we have recently visited along with our view of its prospects. Further, this newsletter will also contain any major events that have occurred and which could have a significant impact on a country or company within our investment universe.
Senior Investment Analyst Ruchir Desai recently travelled to Bangladesh to meet with management of portfolio and shortlisted companies. Photos are by Asia Frontier Capital, except where otherwise noted.
Bangladesh – a rising consumer story
The national parliamentary elections in Bangladesh took place on 30th December 2018 and the ruling Awami League and its partners garnered a huge victory, winning 288 seats out of the 300 which were contested in the polls. Though the return of the Awami League was anticipated, the scale of the election win was much greater than expected. A continuation of the same government is a big positive for the economy as policies related to infrastructure development and possible banking sector reform can continue in a more stable fashion.
More importantly, with the elections completed, market sentiment should improve as this was a big overhang for the Bangladesh equity markets in 2018. So far, as we expected, the market has reacted very positively to the completion of elections, with the Dhaka Stock Exchange Broad Index (DSEX Index) up +8.4% so far in 2019. As a result, most of the fund’s holdings in Bangladesh have rebounded by 5-12% so far this year with Brac Bank showing the highest absolute return.
We expect this positive momentum to continue as the market can now focus on the fundamentals of the companies which remain sound as well as the robust GDP growth of 7% over the next five years. Furthermore, valuations over the past year have also become more reasonable.