Update Frontier Markets - fact sheets October

In October, the Frontier Market Index rose 2.1%. Sentiment was particularly positive in countries like Pakistan (+12.8%), Kenya (+12.7%), and Sri Lanka (+11.8%). The largest decline was seen in Vietnam (-3.7%). Portfolio positions focused on Frontier Markets increased by an average of 3.8%.

In Pakistan, sentiment was positive. The State Bank of Pakistan lowered its interest rate to 15%, the lowest level in two years, to stimulate economic growth. This 2.5% cut aims to keep inflation within the 5% - 7% target and promotes sustainable economic growth. Despite a slight increase in consumer prices, inflation has significantly dropped from its peak of nearly 40% last year, creating room for rate cuts. Since June, the rate has been reduced by a total of 7%, with further reductions to 13.5% expected by June 2025. Economic stability has been reinforced by a $7 billion IMF loan, eased import and currency restrictions, and improved foreign exchange reserves. Pakistan anticipates further inflation declines due to favorable factors such as reduced demand and stable oil prices. The country is also working on additional financing to address $26 billion in upcoming debt obligations. With falling inflation and accommodative policies, the government projects economic growth of 3.6% this year, compared to 2.5% last year.

Despite political unrest in Kenya, the stock market closed higher in October, and the economy continues to perform strongly. Kenya's Supreme Court upheld the parliament's decision to dismiss Vice President Rigathi Gachagua following corruption allegations, sparking a power struggle with President William Ruto. Earlier tax protests caused unrest, but the Kenyan shilling remains strong, rising 27% since a low in January. Kenya’s dollar bonds and stock index have risen and remain popular among investors. The Central Bank remains confident in the stability of the shilling, supported by foreign reserves and IMF funding. With declining inflation and growth in agriculture and services, the economy is expanding faster than other emerging markets. Gachagua’s removal could be a positive step toward combating corruption and achieving further economic progress.

Investors in Sri Lanka were also optimistic after the Governor of the Central Bank of Sri Lanka indicated there is room to ease monetary policy, although this depends on the economic situation at the upcoming policy meeting on November 26. While it is too early for a final decision, indicators point to possible rate cuts. Sri Lanka is preparing for a debt swap in November to complete the restructuring of its foreign debt following the 2022 crisis. The Central Bank Governor confirmed efforts toward a swift resolution. Meanwhile, President Dissanayake supports IMF targets but is exploring alternative ways to ease the burden on the population.

Finally, Vietnam continued to show strong economic results in October, kicking off the fourth quarter with the election of its new president, Luong Cuong. This election strengthens the balance of power, with Luong Cuong and the new party leader To Lam aiming to implement significant reforms. To Lam is focusing on more efficient resource utilization and economic growth, indicating potential infrastructure projects. Government spending is expected to increase in 2025. Prime Minister Pham Minh Chinh recently visited the United Arab Emirates (UAE), Saudi Arabia, and Qatar to strengthen ties. During the UAE visit, a Comprehensive Economic Partnership Agreement (CEPA) was signed, marking Vietnam’s first free trade agreement with an Arab nation, which will enhance UAE service providers' access to the Vietnamese market.

With Donald Trump’s reelection as U.S. president, Vietnam will undoubtedly face a complex diplomatic landscape. During Trump’s first term, Vietnam successfully strengthened its relationship with the U.S., and the recent upgrade of this relationship to a strategic partnership presents opportunities. Vietnam's role in the U.S. Indo-Pacific strategy underscores its importance for regional stability and economic growth.

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