Developments January - Fact sheets
In January, the broad Frontier Markets index rose 3%. The price development of the TCM Frontier funds on average lagged slightly compared with the various indices. The increase was the largest on the stock markets in Vietnam (+9.6%) and Nigeria (+2.3%). The biggest fallers were the markets in Pakistan (-16.1%), Egypt (-13.5%) and Morocco (-3.4%).
In Pakistan, the loss was caused by a 15% devaluation of the rupee. The government eventually agreed to the IMF's strict conditions. The devaluation and interest rate increase by another 1% to 17% were among the requirements.
In Egypt, the currency also fell 19% against the euro after the central bank decided to allow more flexibility in the exchange rate to strike a $3 billion deal with the International Monetary Fund (IMF). The devaluation is likely to push inflation to even greater heights. For example, it was announced in January that the consumer price index (CPI) had increased by 21.3% in December, largely caused by a 37.2% increase in food prices.
Due to the recent devaluation of the Egyptian currency, the authorities are likely to raise interest rates again in order to curb inflation. The central bank is expected to raise interest rates by 1 percent or more in February for the fifth time in less than a year. The measures will ultimately have a positive effect on the economy, with the export sector and tourism in particular benefiting. Moreover, foreign investors are coming back again with this low exchange rate. The stock market index is already 10% up measured in local currency and the fund largest Egyptian positions are currently higher this year (measured in euro).
Vietnam started the year well with the Ho Chi Minh Index rising 9.6%, the biggest increase in two years. After a sharp correction last year, investors are coming back. Signs of cooling inflation in several parts of the world fueled optimism that interest rates have peaked, with potential positive implications for growth.
In addition, retail sales increased by no less than 20% in January. This strong growth figure was mainly due to a revival in tourism. The country welcomed 871,200 international visitors in January. Developments in China also boosted investor sentiment. The reopening of the economy, the easing of the regulatory burden on the internet sector and also more policy support for the real estate sector contributed to a positive sentiment.
In January, two deputy prime ministers and President Nguyen Xuan Phuc took responsibility by resigning for violations committed by some government officials. The new deputy prime ministers have been appointed and vice president Vo Thi Anh Xuan has taken over as president.
The resignation of high-level political leaders is seen as the latest move of the Communist Party of Vietnam's corruption campaign. The party's continued efforts should further strengthen confidence in the government. The main premise is that the political turmoil will not change Vietnam's foreign policy, as the goal is still to develop the economy. The government so far improves the framework to welcome more foreign investors and attract more capital inflows.
Finally, the PMI index in Nigeria rose to 53.5 in January. The figure remains at a high level. Companies see consumers spend more money, increase production and also hiring more staff. After a minor correction this month, the Nigerian All Share Index continues to trend upwards, trading just 16% below its 2008 All Time High. Despite the 23.6% increase in the Nigerian Main Index last year, the stock market ranks among a price/earnings ratio of 10.3 and remains one of the most attractive valued markets.
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
