THE FUND:

Ghana awaits results from the huge MTN Ghana IPO.

The fund lost 6% in July, worse than the benchmark, MSCI EFM Africa ex South Africa Net Total Return Index which lost 3.8%.

The fund’s large overweights in Egypt and Nigeria were the main explanation for the underperformance relative to the benchmark, while we gained on the underweights in Kenya and Morocco. On a sector level, the fund gained from underweights in Telecom and Materials while we lost on overweights in Financials and Health Care. The Swedish Krona appreciated 2.3% in July decreasing the SEK return in the month. There were no major changes to the portfolio during the month. (all changes in SEK).

MARKET:

The African (MSCI EFM Africa xSA -3.8%) markets underperformed compared to other Frontier Markets (+0,5%) in July. Zimbabwe emerged as the best performing market (+20.2%) ahead of the first presidential elections post- Mugabe since independence in 1980, followed by Namibia (+6.5%). The worst performing market was BRVM (a joint exchange for Senegal, Ivory Coast, Benin etc.) and Egypt (-5.1%).

Globally the focus remained on trade barriers discussed and introduced by the US, EU, and China. The election in Zimbabwe appears not to have signaled much needed democratic progress hoped for by the people of Zimbabwe and the rest of the world. Numerous reports from independent sources describe harsh crackdowns ordered by President Mnangagwa/the army/the police against opposition supporters questioning the results of the election declaring Mnangagwa the winner.

Inflation in Egypt (-5.1% in July) rose as expected after price hikes on goods and services such as electricity etc. were introduced in July. Prices rose 14.4% vs a year ago and July became the first month in a year when the inflation rate did not decrease compared to the previous month.

The central bank in Nigeria (-5%) kept rates at 14% even though inflation continues to fall – 11.2% in July vs 11.6% in June. The upcoming elections in February 2019 are becoming the talk of the town after a high-ranking representative from President Buhari’s party (APC) defected. The election is still months away and people changing sides is quite common, nonetheless, it increases uncertainty regarding the potential outcome.

Kenya’s central bank Kenya (-2.5%) surprised the market and lowered its key interest rate to 9% (from 9.5%). Even though the Kenyan Shilling is viewed as the most overvalued currency among frontier markets it has continued to strengthen. Large inflows from Kenyans abroad (or Kenyan assets held abroad) trying to beat the tax amnesty deadline of June 30th is one reason for this. Inflows increased by over 50% in the first five months of 2018 totaling USD 1.1bn.

Ghana (-2.7%) is eagerly awaiting results of MTN Ghana’s IPO that closed at the end of July. MTN is seeking to sell 35% of their shares for a total value of over USD 700m to investors. For a market that usually turns over USD 100k on a daily basis this is a fairly spectacular event. Listing is planned for early September.

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.