Marketing Director, Asia Frontier Capital

Asia Frontier Capital

Marketing Director

Investing in high growth Asian frontier economies.

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

Cross Asset Strategy

<ul><li>The year began on a strong positive note for global equity markets and most AFC funds also had a positive return at the start of the year.</li><li>Investor sentiment continues to improve as confidence grows that we are at the peak of global inflation and interest rate hikes.</li><li>This was also evident in the less aggressive 25 basis point increase in interest rates by the U.S. Fed on 1st February 2023, as well as less hawkish messaging from the U.S. Fed in the past few weeks.</li></ul>

The year began on a strong positive note for global equity markets and most AFC funds also had a positive return at the start of the year.Investor sentiment continues to improve as confidence grows that we are at the peak of global inflation and interest rate hikes.This was also evident in the less aggressive 25 basis point increase in interest rates by the U.S. Fed on 1st February 2023, as well as less hawkish messaging from the U.S. Fed in the past few weeks.

Asian Frontier Markets Start the Year Strong - Asia Frontier Capital (AFC) - January 2023 Update

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Asian Governance: Diversity & Incentives Through the Cultural Lens

Frontier and emerging markets (Vietnam)

Dylan Waller

My previous insight <a href="https://www.smartkarma.com/insights/top-consumer-themes-in-vietnam" target="_blank" data-smartkarma-citation="insights:27656">Top Consumer Themes in Vietnam</a> notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation, while avoiding some of the over-hyped momentum names that trade at unreasonable multiples.  Another interesting trend to note in the market includes the lower valuation of select stocks that are positioned in key, high growth sectors, which are by no means value traps.  After eliminating value traps and overvalued momentum names, it is clear to see the VN Index offers asymmetric value for investors.  The attractively priced consumer growth stocks and value names are both relatively favorable compared to that of other frontier markets ( less favorable macro picture but similar valuation in many cases). Some of the themes mentioned in this insight are an indirect play on China's economic transformation, as it chooses to "export" some of its less sophisticated economic activities to other frontier markets ( ie. coal in Mongolia and textiles in other frontier markets).  This has intensified recently on the back of trade war tension.  Stocks in Vietnam that are in sectors positioned to benefit from this trade at relatively depressed valuations. I included an overview of the following themes and some stocks positioned in these areas:
<ul class="">
<li>
Power is an appropriate way to access Vietnam’s broad based economic growth: Investment in power stocks is an indirect play on Vietnam’s continued growth in manufacturing and the country’s improved standards of living.</li>
<li>
Industrial park operators are attractively priced and offer exposure to Vietnam’s manufacturing narrative, which is a very straight forward growth narrative: Industrial park operators have relatively guaranteed success and have been able to attract large names such as Samsung and LG.</li>
<li>
Vietnam’s textile industry will be a key driver of growth moving forward: Vietnam’s textile industry has continued its course of growth, even though it has been moving into electronics exports and also facing increased competition from lower cost countries such as Bangladesh.</li>
<li>
Port stocks are extremely cheap, as perceived risk is greater than actual risk: The valuation for port operators has also become very depressed in recent years, though this is clearly a strong long term growth areas for Vietnam’s stock market.</li>
<li>Vietnam’s agriculture growth recently reached a 7 year high, though growth still remains in the lower single digits and below the country’s average GDP growth.</li>
<li>Plastic and steel stand out as high growth areas, though margins are sensitive to commodity price movements.</li>
</ul>

My previous insight Top Consumer Themes in Vietnam notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation, while avoiding some of the over-hyped momentum names that trade at unreasonable multiples.  Another interesting trend to note in the market includes the lower valuation of select stocks that are positioned in key, high growth sectors, which are by no means value traps.  After eliminating value traps and overvalued momentum names, it is clear to see the VN Index offers asymmetric value for investors.  The attractively priced consumer growth stocks and value names are both relatively favorable compared to that of other frontier markets ( less favorable macro picture but similar valuation in many cases).  Some of the themes mentioned in this insight are an indirect play on China's economic transformation, as it chooses to "export" some of its less sophisticated economic activities to other frontier markets ( ie. coal in Mongolia and textiles in other frontier markets).  This has intensified recently on the back of trade war tension.  Stocks in Vietnam that are in sectors positioned to benefit from this trade at relatively depressed valuations.  I included an overview of the following themes and some stocks positioned in these areas:


Power is an appropriate way to access Vietnam’s broad based economic growth: Investment in power stocks is an indirect play on Vietnam’s continued growth in manufacturing and the country’s improved standards of living.

Industrial park operators are attractively priced and offer exposure to Vietnam’s manufacturing narrative, which is a very straight forward growth narrative: Industrial park operators have relatively guaranteed success and have been able to attract large names such as Samsung and LG.

Vietnam’s textile industry will be a key driver of growth moving forward: Vietnam’s textile industry has continued its course of growth, even though it has been moving into electronics exports and also facing increased competition from lower cost countries such as Bangladesh.

Port stocks are extremely cheap, as perceived risk is greater than actual risk: The valuation for port operators has also become very depressed in recent years, though this is clearly a strong long term growth areas for Vietnam’s stock market.
Vietnam’s agriculture growth recently reached a 7 year high, though growth still remains in the lower single digits and below the country’s average GDP growth.
Plastic and steel stand out as high growth areas, though margins are sensitive to commodity price movements.


Vietnam Market Update: Deep Value Found in Salient Themes

The VN Index currently trades at much more reasonable valuation and is poised to now move in line with earnings growth of around 15-20% in the coming years. Moreover, there are currently some asymmetric themes in the equity market, which reward active/bottom up investing, while momentum investing has lost its charm. 
The government did not meet its SOE equitization target in 2018, as only 12 companies completed the process near the end of last year compared to the target of 85. Moreover, only around 31 companies completed the divestment process compared to the goal of 181 companies.
2019-2020 will have an environment where companies with strong fundamentals that underperformed in the previous years are more likely to outperform in subsequent years due to the mispriced nature of these securities. 
Vietnam's consumer story is stellar compared to that of other Asian markets, which makes growth investing in consumer stocks highly ideal.  According to BMI, private consumption growth will still remain relatively strong, growing by 6.8% in 2019 compared to 7% in the previous year.  Vietnam’s economic growth will largely be spearheaded by increased domestic consumption and the pick up in tourism, though Vietnam’s growth is also being supported by strong and diverse double-digit export growth. There are a large number of consumer stocks in the market that are attractively positioned in high growth areas in retail and tourism.  Moreover, the valuation of select consumer companies is attractive relative to frontier market peers and to that of historical norms. <a href="https://www.smartkarma.com/entities/21027" target="_blank" data-smartkarma-citation="entities:21027:1">Phu Nhuan Jewelry Jsc (PNJ VN)</a> has the most clear and attractive growth narrative ahead of it.
The generalized emerging market sell off coupled with the irrational gyration of momentum names has produced a sweet spot for certain parts of Vietnam's stock market.  The overall market PE only paints a small portion of the picture of how Vietnam's stock market compares to its peers.  A large number of consumer stocks appear undervalued when considering Vietnam's macro profile relative to that of other frontier markets.  Moreover, it is very interesting how other stocks in key areas trade at single digit PEs, many of which have superior liquidity and strong growth prospects.  All of these asymmetric characteristics of the market edify Vietnam's value and reward those with an active eye.

The VN Index currently trades at much more reasonable valuation and is poised to now move in line with earnings growth of around 15-20% in the coming years. Moreover, there are currently some asymmetric themes in the equity market, which reward active/bottom up investing, while momentum investing has lost its charm. 
The government did not meet its SOE equitization target in 2018, as only 12 companies completed the process near the end of last year compared to the target of 85. Moreover, only around 31 companies completed the divestment process compared to the goal of 181 companies.
2019-2020 will have an environment where companies with strong fundamentals that underperformed in the previous years are more likely to outperform in subsequent years due to the mispriced nature of these securities. 
Vietnam's consumer story is stellar compared to that of other Asian markets, which makes growth investing in consumer stocks highly ideal.  According to BMI, private consumption growth will still remain relatively strong, growing by 6.8% in 2019 compared to 7% in the previous year.  Vietnam’s economic growth will largely be spearheaded by increased domestic consumption and the pick up in tourism, though Vietnam’s growth is also being supported by strong and diverse double-digit export growth.  There are a large number of consumer stocks in the market that are attractively positioned in high growth areas in retail and tourism.  Moreover, the valuation of select consumer companies is attractive relative to frontier market peers and to that of historical norms. Phu Nhuan Jewelry Jsc (PNJ VN) has the most clear and attractive growth narrative ahead of it.
The generalized emerging market sell off coupled with the irrational gyration of momentum names has produced a sweet spot for certain parts of Vietnam's stock market.  The overall market PE only paints a small portion of the picture of how Vietnam's stock market compares to its peers.  A large number of consumer stocks appear undervalued when considering Vietnam's macro profile relative to that of other frontier markets.  Moreover, it is very interesting how other stocks in key areas trade at single digit PEs, many of which have superior liquidity and strong growth prospects.  All of these asymmetric characteristics of the market edify Vietnam's value and reward those with an active eye.

The sustainability of the VN Index’s Rise The VN Index surpassed 1,100 points at the end of last week, and has <a href="https://www.bloomberg.com/quote/VNINDEX:IND" target="_blank">returned 59%</a> in the past year, as of February the 23rd.  Strong performance during 2017 occurred due to significant PE expansion, as well as the strong EPS growth.  Moving forward, the main catalyst for Vietnam includes various IPOs and state divestments through 2018-2020, while the country’s healthy macroeconomic conditions will continue to support the market.  All of these factors…

The sustainability of the VN Index’s Rise  The VN Index surpassed 1,100 points at the end of last week, and has returned 59% in the past year, as of February the 23rd.  Strong performance during 2017 occurred due to significant PE expansion, as well as the strong EPS growth.  Moving forward, the main catalyst for Vietnam includes various IPOs and state divestments through 2018-2020, while the country’s healthy macroeconomic conditions will continue to support the market.  All of these factors…

Vietnam Update: Market Complexity Grows, yet the Attractive Economic Narrative Remains in Place

Vietnam

Hoa Phat Group is a leading industrial manufacturing group in Vietnam, primarily specializing in iron and steel production, including construction steel, hot rolled coil, steel pipes, and galvanized steel. The group also diversifies into agriculture, real estate, and home appliances. Founded in August 1992 as a construction machine and equipment trading company, Hoa Phat Group is headquartered in Hanoi, Vietnam.

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Hoa Phat Group (HPG VN)

Asian Frontier Markets Start the Year Strong - Asia Frontier Capital (AFC) - January 2023 Update

The year began on a strong positive note for global equity markets and most AFC funds also had a positive return at the start of the year.

Asia Frontier Capital

Asian Governance: Diversity & Incentives Through the Cultural Lens

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and...

Bondcritic

Vietnam Market Update: Deep Value Found in Salient Themes

My previous insight Top Consumer Themes in Vietnam notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation,...

Dylan Waller

Top Consumer Themes in Vietnam

The VN Index currently trades at much more reasonable valuation and is poised to now move in line with earnings growth of around 15-20% in the...

Dylan Waller

Vietnam Update: Market Complexity Grows, yet the Attractive Economic Narrative Remains in Place

The sustainability of the VN Index’s RiseThe VN Index surpassed 1,100 points at the end of last week, and has returned 59% in the past year, as of...

Dylan Waller

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