East Capital Global Frontier Markets

Frontier markets demonstrated resilience in Q3 despite persistent volatility during the quarter. East Capital’s Global Frontier Markets strategy returned 3.2%, trailing the MSCI Frontier Markets Index which returned 4.5%. The quarter saw a sharp sell-off in early August, driven by global growth concerns, but sentiment later improved as the FED initiated rate cuts, sparking a rally in September.

In Vietnam, banks were strong performers. Asia Commercial Bank (ACB) rose 10.5%, taking its year-to-date return to 22.4%. Techcombank gained 7.5%, taking its year-to-date return to an impressive 50.4%. Benefiting from accelerating economic momentum and higher-than-expected credit growth, both banks remain attractively valued with 2025e P/B ratios of 1.1x for ACB and 1.0x for Techcombank. FPT Corporation, the country's leading IT and telecommunications services provider, continued its robust growth, reporting a 20.5% increase in revenue and a 22.6% rise in profit for the first seven months of the year. The stock gained 6.8% during the quarter, bringing its year-to-date performance to 59.0%. FPT remains a key investment, capitalising on the continued demand for digital transformation services.

In the Philippines, our holding in Puregold, a major grocery retailer, surged 35.6% as improved risk appetite reignited interest following over five years of market de-rating and foreign outflows. With a 2025e P/E of 8.3x, Puregold remains one of the most attractively valued grocery retail names across emerging and frontier markets. The decline in food inflation, particularly in rice prices, has also strengthened its outlook.

In Morocco, Akdital Holding, the largest private hospital operator, rallied 63.5% after successfully raising nearly USD 100 million. These new funds will support the company’s expansion, with a focus on maintaining annual growth in excess of 20%. As the leader in Morocco’s private healthcare sector, Akdital is well-positioned to capitalise on the growing demand for healthcare services.

Our recent addition, Saudi Reinsurance, the country’s leading reinsurer, increased 25.3%. Supported by Saudi Arabia’s ambitious Vision 2030, the Public Investment Fund (PIF) increased its stake, reinforcing Saudi Re’s position as a key player in the national reinsurance market. Despite the stock’s strong rally, its 2025e P/B ratio of 1.8x remains attractive, especially compared to larger peers trading at around 5x. Meanwhile, our holdings in the UAE also performed well. Tecom, the Dubai-based free zone operator, gained 26.6% and Dubai Taxi, the largest taxi operator in the UAE, rose by 35.3%. Both companies benefited from strong business activity and talk of interest rate cuts, which have supported high-dividend stocks in the region. Similarly, Emirates NBD, Dubai’s leading bank, enjoyed a solid period with a 23.0% return. Despite the strong performance, the stock trades on a 2025e P/B of 1.0x, given its high RoE of 17%.

On a more cautious note, Kaspi, Kazakhstan’s fintech and e-commerce leader, came under pressure after a short seller report raised concerns about its operations. The stock fell 20% in response to the report, although even after the dip, Kaspi remains up 17.7% year-to-date. While we believe the report exaggerated certain issues, we reduced our exposure by roughly a third to manage risk. Kaspi continues to grow earnings by more than 25% annually and remains an attractive investment with a forward P/E of 7.5x. We are monitoring the situation closely and engaging with the company to assess the validity of the claims.

Among the weaker performers was Coca Cola Icecek, Turkey’s leading bottler with operations in several frontier markets, which fell by 25.9%. The company’s downward revision in volume growth was driven by softer sales in Pakistan, while negative sentiment in the Turkish equity market further pressured the stock. However, given the strong 82% gain earlier in the year, this correction, though substantial, was not entirely unexpected.

From a top-down perspective, two major events shaped the Asian landscape: Pakistan’s IMF deal and political developments in Bangladesh. Pakistan secured a fresh USD 7 billion IMF agreement, stabilising its economy amid external debt challenges. In Bangladesh political uncertainty increased, but a caretaker government has restored a sense of calm. As political uncertainty recedes, investor confidence is gradually returning, and there are now reasons to be optimistic about the country's economic outlook.

As part of our ongoing efforts to engage with companies in these markets, we recently attended a large investor conference in London, where we met a number of companies across frontier and small emerging markets. Impressions were broadly positive, with many companies continuing to grow and looking for ways to leverage the declining interest rate environment in most markets. 

Overall, we observe that the global investment climate remains supportive for frontier markets, driven by the Fed’s rate cuts and China’s stimulus package, which have further strengthened risk appetite. Against this backdrop, Asian markets, including Vietnam, the Philippines, and Pakistan, are benefiting from improved economic fundamentals, particularly in the banking, technology, and consumer sectors. Middle Eastern markets, particularly Saudi Arabia and the UAE, are similarly poised to benefit from interest rate cuts and increased business activity driven by economic diversification efforts. Despite a strong year-to-date performance of 23.7%, our strategy still offers attractive opportunities against this backdrop, with a forward-looking P/E of 7.2x, representing a 62% discount to developed markets and a 43% discount to emerging markets based on current global averages. We remain focused on selectively investing in companies with solid growth potential and sound fundamentals and believe that further value can be captured in the period ahead.

Performance in USD net of fees.

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In 2021 global financial markets data company Lipper named East Capital Global Frontier Markets the best European fund for the past three years in the Equity Frontier Markets category. The announcement underscores the fund's outstanding development and East Capital's expertise in the area.