In September, the Frontier Markets index fell -6.8%, with the price development of the TCM Frontier funds on average in line with the indices. Global sentiment was negative due to rising interest rates and fears of an economic recession. The biggest declines were seen on the stock exchanges in Vietnam (-10.7%), Morocco (-4.7%) and Nigeria (-4.2%). Egypt (+0.2%) was the only market to trade slightly higher at the end of the month, despite higher inflation figures.
Consumer prices rose by 15% in September compared to last year, resulting in additional pressure on the currency. The Egyptian government said it will accept a more flexible exchange rate while negotiating a deal with the International Monetary Fund (IMF). Greater currency flexibility is a key issue in the discussions with the IMF. Authorities hope to reach an IMF deal within one or two months, although the amount borrowed has yet to be determined.
Due to involuntary sales (liquidation of private portfolios with borrowed money), Vietnam was the world's worst-performing stock exchange in September. Vietnamese stocks fell to their lowest level in nearly two years as a wave of forced liquidations swept the market amid concerns about rising interest rates. As a result, the Ho Chi Minh index fell to its lowest level since January 2021.
Sentiment towards Vietnamese equities came under pressure in September after the central bank raised its key rate by one percent to curb inflation and the decline in the domestic currency. As a result, the market's “oversold level” has fallen to an extreme level, which historically often occurs around bottom levels. In terms of valuation, the market has also fallen sharply with the P/E ratio falling from 18 at the beginning of this year to 11 in September.
Finally, the Nigerian president has launched an ambitious plan to boost the economy with a record budget of 20.5 trillion naira (€45 billion). The budget that is expected to be approved and will be launched in January 2023, is 19% higher than this year's government spending and is also the highest ever in Nigeria, putting fiscal sustainability, economic growth and security at the forefront.
The country will implement the necessary reforms in this regard. At least 5.3 trillion naira (€10 billion) or 26% of the proposed budget, should be invested in infrastructure construction that could create many new jobs in Africa's largest economy.
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