Developments November

Published on december 8, 2022
Developments November

​In November, the Frontier Markets index rose 0.9% with the TCM Frontier funds on average lagging slightly the indices. The increases were biggest on the stock markets of Egypt (+10%) and Nigeria (+4.1%). The fallers were the markets in Kenya (-6.7%), Kazakhstan (-6.1%) and Vietnam (-1.4%).

Global sentiment has been generally positive as interest rates fell and inflation eased, paving the way for a slowdown in further interest rate hikes. Also a positive signs that China is easing its strict Covid rules amid growing social unrest.
In Egypt, the positive sentiment of October continued. Investors are returning to Egypt after the domestic currency devaluation, the $3 billion IMF loan and a $1 billion grant to a sustainability fund. Investments from the Persian Gulf countries have also supported the market. For example, the Abu Dhabi investment fund ADQ takes interests in important listed Egyptian companies. Also, the Saudi Arabia's sovereign wealth fund has created a company that will invest in parts of Egypt's economy.

In particular, the rise of Commercial International Bank Egypt (+16.7%), with an index weighting of 30%, pushed the market higher. This was also seen in the TCM Africa fund, where this share is part of the selection. The bank is expected to benefit from higher interest rates now that the central bank has raised its policy rate. Despite the rally, the Egyptian stock market is trading at a P/E of 6.4, well below its 9.2 average over the past 10 years.

In Nigeria, the PMI index rose to 54.3 in November, the highest level in 6 months. Companies see consumers spend more money, and increase production or purchases and also hiring more staff. It was also announced in November that the Nigerian economy grew by 2.3% in the third quarter. This is visible on the stock market. For example, the Nigerian All Share index is 23.7% higher this year measured in euro, the 3rd year of rise in a row, and 112% higher since the COVID bottom of April 2020. Here too, it is remarkable that the market is trading with a p/e of only 6.4.

Finally, November was another volatile month on the Vietnamese stock markets. The declining trend of previous months continued, with the VN index falling by another -19%. After a heavy sell-off, a bottom was set on November 16, followed by a rally of more than 20%. This created a clear reversal pattern (hammer) in the chart, which meets the characteristics of an extreme level of panic. After months of decline, it is therefore quite possible that the 'snowball effect', caused partly by margin calls, has dried up. Looking into 2023, the Vietnamese stock market has one of the strongest prospects for earnings growth, while stock markets have fallen to the lowest valuation ratios. In addition, the Vietnamese government expects an economic growth of 6.5% for 2023, where the average profit growth for companies is estimated at 18%. Whether the bottom has been set will become clear in the next months, but the outlook seems to be positive. 

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

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