THE MARKET

MSCI Frontier Markets xGCC Net (EUR) fell 0.3% in April, broadly in line with MSCI Emerging Markets Net. Two of the smaller frontier markets, Sri Lanka (2% of the index) and Bulgaria (0.1% of the index) rose 12% and 5%, respectively. Worst performers were Jordan (1.8% of the index) and Lebanon (3.7% of the index). It was quiet in global equity markets. Given the shocks with both Brexit and Trump, there was some nervousness before the first round of the French presidential election. Despite a relatively expected outcome and the fact that the probability of a second round win by the right-wing extremist Le Pen candidate did not change significantly, we saw rising world markets after the first round. Oil prices rose during the first part of the month from USD 51-53/barrel to USD 55-57 on optimism about OPEC’s production cutbacks, only to fall back to USD 50-52/barrel on concern concerns primarily for rising US output. However, the reactions to our markets were modest. Oil price-dependent Nigeria was one of the better markets during the month and market movements before and after the French presidential elections were limited. One of the major frontier markets, Pakistan, moves to the emerging market category by the end of May as per index provider, MSCI’s definition.

THE FUND

The fund rose 0.4% (EUR) during the month, marginally better than the benchmark index. Positive contributions were received from our stock selection in Pakistan, where price increases of approximately 10% in Meezan Bank, Systems and TPL Properties contributed positively while lack of holdings in fertilizers and some of the larger banks also helped relative returns. We also received a positive contribution from our overweight in Sri Lanka, although our sub-portfolio developed a few percentage points weaker than the market as a whole. Some of our Egyptian holdings, especially cement companies, also contributed positively. The winner of the month was Suez Cement, which rose by almost 27% (EUR) on acquisition rumours. Market expectations for the cement market in Egypt are still very low for a good reason. However, it is reflected in the valuations. Since our first purchase in early December, Suez Cement has risen close to 100% but is still valued at around USD 30/debt-adjusted tonne of installed capacity. It is around ¼ of valuations in Pakistan, which on the other hand currently is a very profitable market. Our overweights in Bangladesh and Vietnam contributed negatively during the month, although to a limited extent. No major transactions were carried out during the month.