Frontier market ended the quarter on a mixed note with those in Asia showing solid gains while African and Eastern European markets closed in the red. The best performing markets were Pakistan (+13%) and Vietnam (+11%). The worst performing markets were Ghana (-19%), followed by Tunisia (-14%) and Nigeria (-13%). The market turmoil that erupted from Brexit only had a small knock on effect on frontier market outside of Europe. The lower correlation saved them from the volatility registered in developed markets following the British vote.

During the quarter we reduced our cash position from north of 20% to sub 10%, as our models were giving bullish signals. We built positions in Kazakhstan and Vietnam, while we took some profits in Indonesia. We are optimistic about the FM space at the moment, as our models give us comfort in our bullish stance. From a technical aspect the situation relative to EM and DM has not looked this attractive in years.

A major event during the quarter was the upgrade of the Pakistani market to EM status. The status upgrade has been in the cards for some time, but the news was well received by the market which rallied sharply on the news. Pakistan Stock Exchange is the best performing market YTD in Asia. Data source: Bloomberg