THE FUND:

The fund rose 2.6% in March, slightly lower than the benchmark, MSCI EFM Africa ex South Africa Net Total Return Index which rose 3.1%. Tunisia was the best market in Africa rising 18.7% followed by Egypt (+13.5%). The worst performers were Mauritius (-8.1%) and Botswana (-7.1%). The first quarter of 2018 ended with a strong performance in most African markets. Several of them beat out other Frontier Markets. The Swedish Krona depreciated 0.9% during the month adding to the positive the SEK return in the fund.

The positive relative performance in March was mainly generated from the overweights in Egypt and underweights in Mauritius. Our underweight in Kenya and overweight in Nigeria were the main negative contributors relative to the benchmark. On a sector level, the fund gained from our holdings in Industrials and underweights in Real Estate, while we lost on overweights in Financials (mainly in Nigeria) and underweights in Telecom.

In March, we also added to our position in Letshego, Botswana. The company has a strong business model in consumer financing and with interest deducted by the employer, considerably reducing credit risk. It has a presence in several African countries with Botswana, Namibia, and Mozambique among the largest. Macro news flows have been predominantly negative (drought, budget irregularities etc.) for some time and the company has not been appreciated by investors. As the economic environment picks up and the company trades at attractive multiples we believe the Letshego deserves to be re-rated. Return on equity has improved considerably while P/E multiples have not followed with the stock currently trading at 1x. Earnings per share grew almost 15% last year and the company trades at a trailing P/E of 5.5x. (all changes in SEK)

MARKET:

The African markets performed better (3.1%) compared to other Frontier Markets (+1.6%) in March. Egypt’s (+13.5%) central bank lowered rates, as expected, for the second time in 2018. Lending rates were cut by 1% to 17.75% and are expected to fall by another 2-3% during the rest of the year. Inflation continues to fall (11.9% in February compared to 14.3% in January). The market’s performance was also helped by a number of strong reports from companies representing different economic sectors. The political situation remains stable with al-Sisi winning the election with 97% of the votes. However, election turnout was only 41%, mainly due to the lack of real opponents.  Nigeria’s (-4.3%) stock market was not impressed by the numbers reported by financial companies. Even though profits rose between 10-40% the market focused on rising NPLs as a result of Etisalat/9mobile defaulting. They were taken over by creditors last year and are in the process of being sold. The central bank in Ghana (+2.8) surprised the market with a yet another rate cut when they lowered rates by another 2% to reach 18%. Kenya (+10.6%) performed strongly after a “peace meeting” between Kenyatta and opposition leader Odinga and on increased speculation on the removal of the interest rate cap which would benefit the economy in general and the financial companies in particular.

DISCLAIMER:
Capital invested in a fund may either increase or decrease in value and it is not certain that you will be able to recover all of your investment. Historical return is no guarantee of future return. The Full Prospectus, KIID etc. are available on our homepage. You can also contact us to receive the documents free of charge. Please contact us if you require any further information: +46 8-5511 4570.