THE FUND:

Tundra’s Mathias Althoff and CIRA’s CEO after a meeting at Badr University in Cairo. The university has enrolled 7,500 students in 9 different faculties.

The fund lost 1.2% in November, slightly worse than the benchmark, MSCI EFM Africa ex South Africa Net Total Return Index, which decreased 0.8%. The fund’s total return year-to-date is -1.6%, which is still slightly ahead of the benchmark’s -2 %.

Our stock selection in Egypt (53% of assets) added the most positive contribution to the relative return. In a falling market our holdings added approximately 1.5%-points to the fund return. The Nigerian holdings (33%) together with the underweight in Morocco (0%) had the biggest negative contribution to the relative return.

On a sector level, the fund gained from overweights in Health Care and underweight in Materials, while the largest negative contributions relative the benchmark came from overweights in Financials and underweights in Consumer Staples. The Swedish Krona appreciated by 1% in November reducing the SEK return in the month.

We disposed of our holdings in Egyptian materials because of a deteriorating operating environment, with slower volume recovery due to lower production capacity expansion because of high interest rates. Newly added production capacity in the industry also adds to the oversupply situation, putting pressure on prices and profitability. We also decreased our position in DICE, a textile producer, after disappointing results. The company has not delivered as planned due to order cancellations and delayed delivery of new production machinery. Valuations at the current level look comfortable and we hope to see improvements early on. We invested in a new holding operating in the education sector. Cairo Investment & Real Estate Development Company (CIRA) operates K-12 schools and a university since 2015. The company is growing in all areas, but going forward the main growth contributor will be higher education. There is a huge deficit of universities with only 40% of high school graduates entering higher education and the government looks favourably on the private sector to help close that gap. CIRA targets young middle class people by charging significantly lower tuition fees compared to top universities but without compromising on quality. With a young, growing population the demand growth should continue to be strong over many years to come. (all changes in SEK)

THE MARKET:

The African markets (MSCI EFM Africa xSA -0.8%) performed worse compared to other frontier markets (+1.9%) in November. South Africa was the best performing market (+8%) while Malawi and Ghana were the worst performers (-13.5% and -7.2% respectively).

Egyptian (-3.4% in November) stocks had a mixed outcome in November after third quarter results with quite a few surprises, both good and bad. Our holdings lean towards positive surprises with continued good sales and profit growth. Inflation in October increased by 17.7% compared to 16% in September, and the central bank kept rates on hold at their meeting in the middle of the month. Some of the more optimistic analysts expect rate cuts during the first quarter of 2019 while most do not anticipate that happening until the second half of 2019. We subscribe to the latter. Nonetheless, we see value in Egypt trading at 8.2x earnings after the correction during the last few months.

Sentiment in Nigeria (-3.5%) weakened in line with oil prices, which retreated more than 30% from year highs in October over USD 86 to year lows below USD 60 at the end of November. Inflation was somewhat lower than expected in October, but still over the target and the central bank kept rates at 14%. The market does not expect any cuts before the February elections next year.

Kenya (+1.8%) recovered after performing weakly over the last few months. Currency worries decreased as newly released data from the central bank showed continued strong growth in repatriations. A surprisingly strong report from telecom operator Safaricom also added to the positive sentiment.

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.