In October, the Frontier Markets index fell by 5.2%, with the TCM Frontier funds slightly outperforming the indices. Global sentiment was weak as a result of rising interest rates and fears of an economic recession. The decline was biggest on the stock exchanges in Vietnam (-19.9%), Nigeria (-12.4%) and Egypt (-4.2%). Positive markets were found in Kazakhstan (+4.7%) and Pakistan (+2.8%).
In October, the downward trend of September continued in Vietnam. Sentiment came under considerable pressure once again as a result of the convergence of a number of developments. For the second month in a row, the key interest rate was raised by one percent to curb inflation and the decline of the domestic currency. The Fed's US rate hike in October also had a significant impact.
Fed's policies have sparked a wave of capital outflows worldwide and Vietnam is no exception. Statistics show that foreign investors sold nearly 1.6 trillion VND (63 million euro) in October. In addition, there was a crisis of confidence as a result of irregularities in the real estate market. The chairman of one of the largest real estate companies was arrested and the tracks led to one of the largest local banks. Since then the unrest has spread to other real estate companies and the banking sector in general. The selling pressure as a result of the above developments caused a 'snowball effect' or margin calls among mainly private investors, which led to panic and involuntary selling.
As a result, the market's oversold level has fallen to an extreme level, which historically often occurs around stock market bottoms.
In Egypt, partly on the advice of the International Monetary Fund (IMF), the currency was devalued by as much as 15% against the US dollar, bringing the total devaluation to 35% for this year. This was one of the conditions Egypt had to agree to after months of negotiations with the IMF for a $3 billion loan. Egypt will also receive $5 billion from international lenders and another $1 billion from a newly established sustainability fund, the IMF said.
In Kazakhstan, the stock market closed higher in October. It is one of the most promising countries in Central Asia, even amid mounting geopolitical tensions. Unlike some of its neighbors, the country has managed to establish peaceful and friendly international relations with global centers of power such as China, the US and the EU. This neutrality can further stimulate the development of the Kazakh economy and capital markets. As a result, the economy of Kazakhstan grew by 3.1% on an annual basis from January to August. For example, the country is building the largest green hydrogen plant in the world and is developing a 45 gigawatt wind farm. Finally, the European Union will work with Kazakhstan to achieve its climate goals. The strategic partnership mainly involves importing green hydrogen and raw materials.
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