By James Eugene

2016 has been far from dull for Frontier Markets. Fluctuating oil prices, MSCI upgrades, interest rate hikes and a newly elected US President have all played a part in the mixed performance of many of these fringe markets. With all of these factors having an impact, it will also make 2017 an interesting year for these fringe markets too. We will now look at the best performers of the year.

1st – Egypt (76.2%)

Best Performing Companies:

• Global Telecom Holding – 245.7%
• Beltone Financial Holding – 207.7%
• EFG Hermes Holding SAE – 189.8%

Egypt has official won the title of “2016’s Best Performing Frontier Market”, with its main index, the EGX 30, recording a spectacular gain of 76%. The stock market is trading at its highest level in its history and also witnessed its market capitlisation increase by 42% over the course of the year.

Despite having a negative impact on other economic indicators, the wide range of reforms the Egyptian government has rolled out over the year have had a positive impact on the market. For example, the large depreciation in the Egyptian Pound against the dollar had encouraged the purchase of stocks by foreign funds. The depreciation has also encouraged foreign investors to keep a close eye on the Egyptian real estate market.

 

2nd – Kazakhstan (58.2%)

Best Performing Companies:

• Kaz Minerals Plc – 221.5%
• KazTransOil JSC – 66.4%
• Kazakhstan Electricity Grid – 63.3%

Poor growth, high inflation and currency turmoil were unable to stop the Kazakhstan Stock Exchange (KASE) from recording an impressive 58% rise in 2016.

The nine-share index was buoyed by the impressive performance for Kaz Minerals Plc, which benefited hugely from rising copper prices over the year and also received an “outperform” retain from Macquarie. KazTransOil also benefited from the rise in the price of another commodity, crude oil. The government is continuing its effort in privatising many of its public assets and has recently expressed its interest in hosting share flotations on the London and Hong Kong stock exchanges.

 

3rd – Argentina (44.9%)

Best Performing Companies:

• Agrometal S.A – 264.9%
• Petrobras Brazil- 175.8%
• Holcim Argentina – 166.9%

Argentina has retained third position for the second year running, and a two digit gain for the fifth year in a row, as President Mauricio Macri continued his market-friendly reforms in the South American nation. This year, Argentina has a lot to look out for, including an increase in foreign direct investment as well as MSCI potentially upgrading the country to Emerging Market.

Agrometal was clearly the best performer with a 265% increase, while Petrobras recovered from its 2015 slump to record a 176% increase. The stock exchange has also welcome four new additions at the start of 2017: Petrobras Argentina, Petrolera del Cono Sur, Petrolera Pamp and Transportadora de Gas del Sur.

 

4th – Pakistan (42.8%)

Best Performing Companies:

• Tri-Star Polyester Ltd – 886.4%
• Tri-Star Mutual Fund Ltd – 705.4%
• Tri-Star Power Ltd – 567.3%

Asian stock markets produced mixed results last year, but Pakistan’s Karachi All Share Index was one of the bright spots in the region, increasing by just under 43% in the 12-month period. The main reason for the dramatic inflows and heightened investor interest occurred after MSCI confirmed that the Pakistan will be reclassified from a Frontier Market to an Emerging Market in the summer.

In 2016, the stock exchange saw three new listings (including Hi-Tech Lubricants and Loads Limited) and is predicted to see seven to eight new initial public offerings (IPOs) this year, with four IPOs expected to be launched by June 2017. The government is also expected to push on with its privitisation plans, as state-run companies such as State Life Insurance Corporation currently in the process of being listed on the exchange.

 

5th – Morocco (30.5%)

Best Performing Companies:

• Dari Couspate – 131.9%
• Total Maroc SA – 128.6%
• Alliance Development Immo – 124.7%

Finally, Morocco’s Casablanca Stock Exchange gained 30.5% over the year, with all sectors (except for engineering) on average enjoying the benefits of a stronger and more attactive market. The stock market was the second strongest in the MENA region after Egypt.

The Moroccan government also sold off a 40% stake in an IPO for Marsa Maroc, a port operator, and raised 1.94 billion dirhams ($197 million). Although many of the largest companies in Morocco are state-owned, Marsa Marco’s recent privatisation could pave way to further IPOs in the future. According to Frontera News, these include:

• Office Chérifien des Phosphates (OCP) (Not-listed, although there are bonds): 100% owned by the government of Morocco, OCP is the world’s largest producer of phosphates and a major global fertilizer company
• l’Office National de l’Eau et de l’Électricité (l’ONEE) (Not-listed): the National Office of Water and Electricity is government owned, but is also one of the largest companies by revenue in Morocco
• Maroc Telecom (aka Itissalat Al-Maghrib or IAM) (Listed on Euronext and CSE): Morocco’s largest telecommunications company, and one of the largest privately owned companies in the country

(source: Frontera News)

 

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