S&P Africa Frontier Total Return Index rose 11.3% in May while MSCI EFM Africa ex South Africa Net Total Return Index rose 7.8%, better than other frontier markets (MSCI Frontier Markets xGCC Net +4.1%). Nigeria rose 15.2%, Kenya rose 13.4% and Egypt finished the month at +5.4%. The best African market in May was Zimbabwe rising 20.9%, followed by Nigeria and Kenya. Namibia was the worst performer (-3.2%) followed by Ghana -2.7%. (All changes in SEK)

Nigeria’s Central Bank introduced a new FX window where foreign investors will be able to trade naira. The new window was first met with scepticism, but as time passed and more information reached the market, the level of acceptance rose significantly. As a result, among May’s best performers in the fund were several of our Nigerian banks. Additional improvements were introduced in early June and we are as a consequence more optimistic on the outlook for Nigeria compared to two months ago. We have longed argued that a functional FX market is key to regaining foreign investors’ confidence in Nigeria, and by the looks of it we are getting there, but there’s still some way to go. MSCI is expected to announce whether Nigeria stays or will be removed from the MSCI Frontier Markets index on June 20th, and we believe that the measures taken are enough to stay in the index.

The beginning of June has been strong and the prospects for continued gains are good due to the much-improved outlook in Nigeria combined with our positive view on Egypt.


Two major changes occurred in the fund in May. 1) The fund has changed its name, fund rules and benchmark as of May 29th. Read more here. 2) We also decided to use the newly introduced “Investor & Exporter FX Window”. This change led to a one time negative effect on May 5th, when the fund fell 8.4% as the change was implemented. Read more here. The reallocation started on May 29th, and at the end of the month approximately 30% of assets were invested in Egypt, while Nigeria had decreased to just over 40%. We have so far invested in 13 Egyptian companies where we see great potential when the economy recovers from the chock of the devaluation in November last year. Our main scenario is that as the economy adjusts to the new price levels, investments will pick up after years of pent up demand which couldn’t be met due to FX scarcity. Consumer companies, which have seen sales volumes half in some cases, will increase sales again as consumers adapt. International interest is still picking up and with continued strong net inflow into both the bond and equity markets.
The fund fell 1.7% in May, underperforming its benchmark which rose 11.8%. Please note that the fund changed its benchmark on May 29th, and that neither index have started using the FX rate from the new window. We expect the MSCI EFM Africa x SA index to change source in the near future. (All changes in SEK)

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