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Frontier Markets Monthly Review: January 2021

On a monthly basis Frontier Market News will recap the major headlines, best & worst performers, best funds and other key statistics and media in the world of Frontier Markets. Here is the monthly review for January 2021.

Major Headlines

Apple Reduces Reliance On China By Shifting Production To Vietnam

In an effort to diversify its supply chain, Apple will move a sizable proportion of its production of iPads from China to Vietnam and the shift is anticipated to take place as early as mid-2021. Apple has also increased its production of iPhone in India and has reportedly moved production of its Mac Mini to Malaysia.

The move is seen as a global trend of global tech giants and multinational companies reducing their dependence on China to produce their products. Rising labour costs, mounting tensions between the USA and China, and the coronavirus pandemic (which significantly disrupted the supply chains) have been cited as the major reasons for the move towards other countries such as Vietnam.

 

Nigeria’s Stock Market Rally Is Not Built To Last

Despite Nigeria stock market being ranked as the best performing Frontier Market in 2020 (and one of the best in the world), many are sceptical about its ability to sustain, let alone build upon, the current valuations in the market.

David Whitehouse at The Africa Report highlights the fact that there is not much foreign money in the market, as well as suggesting that prices are being propped up by rates in a context of low growth and high inflation. The current low interest environment will need to be monitored closely and any future changes may have an impact on the performance of the stock exchange.

 

Argentina Introduced New Tax On Rich To Help Pay For Covid Relief

Argentina imposed a one-off “millionaires’ tax” on individuals whose wealth is in excess of 200 million pesos ($2.3m) in a bid to pay for coronavirus relief and tackle the growing problem of inequality in the country. The tax will be 3.5% on wealth located in Argentina and up to 5.25% on assets held abroad.

Around 20% of the revenue from the tax will be used to cover medical supplies and equipment costs, while another 20% will go towards economic relief for small- and medium-sized enterprises (SMEs). A further 20% has been allocated to scholarships and 15% for social developments. The remainder will go towards natural gas ventures.

 

Lebanese Pound Retains Title Of “World’s Most Undervalued Currency”

According to The Economist’s Big Mac Index, the Lebanese pound once again has been ranked as the world’s most undervalued currency against the US dollar with the figure standing at 68.7%, only marginally ahead of the Russia ruble at 68%.

A combination of economic (market and currency restrictions), political (instability in administrations) and social (protests) troubles have led to the deterioration of the currency against the greenback. Index compiler MSCI has confirmed that Lebanon will be stripped of its Frontier Market status in its upcoming February 2021 Quarterly Index Review.

 

Who Is Flying High In Frontier Markets?

In Citywire’s “Chart of the Week”, Nisha Long looks at the performance of Frontier Markets over a one and three year period and provides a brief overview of a select number of countries that have performed well during that time.

The pick of bunch over three years are Romania (54%), Bahrain (47%) and Kenya (27%).

 

Best Performing Frontier Markets

The best performing Frontier Market in January 2021 was Sri Lanka‘s Colombo All Share Index after the bourse enjoyed a gain of almost 26.5% over the course of the month. The government’s “pandemic stimulus package” for banks and businesses has translated into the stock market and contributed to the market’s recent all-time highs.

Mongolia‘s stock market was the second best performing Frontier Market after posting a gain of 11.7%. The market is currently preparing to list Steppe Gold Ltd on its exchange, subject to regulatory approvals, on or before April 2021. The third best performing Frontier Market was Bulgaria at 11.6%, buoyed in particular by a solid share price rise for Eurohold Bulgaria (49.4%).

Other strong performers were: Nigeria (8.3%), Lithuania (7.2%), Romania (6.7%), Estonia (6.5%) and Ghana (6.1%).

Worst Performing Frontier Markets

After posting a fall of 5.8%, the worst performing Frontier Market in January 2021 was Vietnam. A resurgence in coronavirus cases stoked fear among investors, causing them to pull money from the market. A 5% fall in the middle of the month caused the trading system to freeze for 20 minutes in the morning and completely halt in the afternoon, according to Reuters.

Argentina was the second worst performer last month after its market fell by 3.4% as the coronavirus pandemic continues to take its toll; while Malta‘s stock exchange was ranked as the third worst performing Frontier Market with a 3.2% drop despite a number of stocks reaching record highs during the month.

Other laggards were: Tunisia (-3.2%), Bahrain (-2.1%), Serbia (-2.0%), Jamaica (-1.4%) and Tanzania (-1.0%).

Best Performing Frontier Market Funds

 

Top 3 Frontier Market Funds Jan 2021 (Monthly Perf)

 

Rank

Fund

Perf

1

Evli Emerging Frontier Fund

8.45%

2

Polunin
Discovery Funds – Frontier Markets Fund II

6.19%

3

Tundra
Sustainable Frontier Fund

5.89%

4

Silk
Invest New Horizons Frontier Fund

5.46%

5

GMM
Emerging Markets and New Frontiers Market Equity

5.41%

The best performing Frontier Market fund in January 2021 was Evil Emerging Frontier Fund. The fund, incorporated in Finland, invests in equities across both Emerging and Frontier Markets (Malaysia and Vietnam being the largest constituent countries) and takes into consideration ESG factors of the investment instruments in the fund’s investment decisions.

Podcasts of the Month

A new Frontier Markets podcast was launched in January: Rising Giants Podcast. Hosts Max & Dom generously blessed listeners by releasing four episodes in January:

Episode 1: “Get To Know Your Hosts” Max & Dom

Episode 2: Interviewing Cheryl Ng, startup incubator manager and international consultant for UNDP in Cambodia

Episode 3: Interviewing Tomas Gimenez, a business operator in Cambodia’s FMCG space

Episode 4: Interviewing Omar Sher, an entrepreneur working in the energy space in Cambodia

Follow Rising Giants Podcast on Twitter for more updates and news on podcast releases:

About James Eugene (162 Articles)
Interested in many (maybe too many) things. Football, Politics and Emerging & Frontier Markets, to name a few. Twitter: @James_Eugene

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