Developments third quarter

In the third quarter of this year, the Frontier Market Index rose 0.5%. Sentiment was particularly positive in countries like Egypt (+9.9%), Morocco (+8.9%), and Vietnam (+3.7%). The biggest decliners were Nigeria (-13.5%), Kazakhstan (-5.1%), and Kenya (-2.7%). The positions in the portfolio focused on Frontier Markets increased by 3.4% overall.

The performance of Nigerian stocks was under pressure due to a sharp drop in the Naira this quarter (-12.6%), partly due to a decline in oil prices. Additionally, Nigeria's central bank has raised interest rates multiple times this year in response to persistent inflation, which has reached a 28-year high. Inflation in September rose by 32.2% year-over-year, driven in part by the removal of subsidies on gasoline, electricity, and currency devaluations under President Bola Tinubu.

After a strong stock rally earlier this year, investors in Kenya were less optimistic in the third quarter. Protests against IMF-imposed tax increases forced the government to withdraw these plans. With the temporary suspension of IMF support, Kenya has turned to issuing bonds in shillings, which keeps interest rates on local debt elevated. Despite a recent rate cut, costs remain close to the peak of 2015. The government has adjusted its 2024/25 budget, with spending cuts and more domestic borrowing, but concerns about external financing persist. IMF support is expected, but investors are anticipating delays. The government and the IMF need to address fiscal risks without triggering further social unrest.

In Egypt, sentiment was positive despite declining revenues from the Suez Canal, as shipping companies shift to alternative routes to avoid attacks by Iran-linked Houthis in the Red Sea. Nonetheless, there are positive developments, including investor investments. For instance, Saudi Arabia’s sovereign wealth fund plans a $5 billion investment in Egypt, the latest in a series of Gulf investments. Over recent years, Egypt has received significant Gulf investments, including a mega-deal from the UAE valued at $35 billion.

Vietnam will eliminate the requirement for foreign investors to fully pre-finance stock trades. This measure, effective November 2, aims to increase the likelihood that the country will be classified as an emerging market. Currently, foreign investors must transfer 100% of the purchase amount before investing in Vietnamese stocks. The change could lead FTSE Russell, which has listed Vietnam on its watchlist since 2018, to upgrade the country within a year. This would attract more international investors to the rapidly growing economy of Southeast Asia. The measure aligns with Vietnam's broader strategy to increase the stock market’s value to between 100% and 120% of GDP by 2030.

More news about Vietnam, Africa and the Global Frontier fund can be found in the latest fact sheets of the equity funds:

TCM Global Frontier High Dividend Equity

TCM Vietnam High Dividend Equity

TCM Africa High Dividend Equity