Update - Fact sheets May 2024
In May, the broad Frontier Markets index rose 2.3%, with notable performances from the TCM Vietnam fund (+7.5%) and the TCM Africa fund (+3.6%). The largest gains were seen in the stock markets of Egypt (+10.8%), Kenya (+10.7%), and Vietnam (+5.5%). The biggest declines were in the markets of Nigeria (-6.3%) and Sri Lanka (-4.6%).
In Nigeria, the return measured in euros was negative (-6.3%) due to a decline in the naira. In local currency, the Nigerian All Share Index was up 1.3%. The Central Bank of Nigeria implemented its third significant interest rate hike this year in response to continued inflation, which reached a 28-year high. The Governor of the Central Bank, Olayemi Cardoso, stated that the policy committee decided to raise the rate by 150 basis points to 26.25% for price stability, following earlier hikes of 200 basis points in March and 400 basis points in February. Inflation hit 33.69% year-on-year in April, partly due to the removal of subsidies on gasoline and electricity and devaluations of the naira since President Bola Tinubu took office. Cardoso committed to curbing inflation, supporting the naira, and deviating from the unorthodox policy measures of his predecessor.
In Sri Lanka, sentiment was pressured by rumors about the elections. The country will hold its long-awaited presidential elections between September 17 and October 16. Although the constitution states that elections must occur within a specific period, they have often been postponed in the past. President Ranil Wickremesinghe postponed local elections in 2023 for financial reasons, leading to controversy. There are concerns that the presidential elections might also be delayed, especially given Basil Rajapaksa's statements about holding parliamentary elections prior to the presidential elections. The National People's Party (NPP) appears to be the favorite, which would represent a significant shift in Sri Lanka's political dynamics traditionally dominated by the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP). The NPP has a strong anti-corruption agenda and advocates for integrity and ethical governance.
On the Egyptian stock market, sentiment was positive in May. For instance, Egypt's foreign currency reserves reached a record high following a major deal with the United Arab Emirates, seen as the largest domestic investment ever for the North African country. The reserves rose to $46.1 billion by the end of May, compared to $41.1 billion a month earlier. This increase followed Egypt receiving a second tranche of $14 billion on May 15 as part of an agreement for a major $35 billion financing package, including development rights for the Ras El-Hekma coastal area. This investment allowed for a currency devaluation, thereby unlocking more financing from the International Monetary Fund, the European Union, and others, bringing total aid to Egypt to $57 billion. The IMF expects Egypt's net international reserves to rise to about $49.2 billion by the end of June.
Finally, Vietnamese stocks were popular among investors in May. The uncertainties in the political landscape have decreased now that key leadership positions have been filled. However, the absence of foreign investors and concerns about higher interest rates could lead to increased volatility in the short term. Certain stocks previously traded at a premium among foreign investors are now available at favorable market prices. Additionally, there were positive reactions to news that the U.S. is considering upgrading Vietnam to a market economy status. Lifting trade restrictions will enable more trade between the two countries.
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
