Frontier and emerging markets (Vietnam)

Dylan Waller

Thematic (Sector/Industry)

Pakistan's economy has been through notable challenges since the beginning of 2018, and there will be more clarity at the end of this month, following further discussions with China and the IMF.  Select pockets of Pakistan's stock market are positioned to benefit, which includes companies that export products ( ie. textiles) and also banks on the back of rising interest rates.  Growth will continue to slow in the upcoming years(between 4-5%), and FDI will also likely continue its downtrend on the back of continued macro and political concerns.  The discount of the index will become more significant once macro fundamentals are more clear.
Another game changing event for Pakistan includes the potential for several constituents of MSCI Emerging Markets to be removed, which would further decrease its weighting, and perhaps even move it back to MSCI Frontier market status ( still waiting for more clarity from MSCI). This case with Pakistan is another piece of data that supports my preference for Vietnam to delay its EM upgrade, and to first benefit as the largest/2nd largest MSCI frontier market constituent. Egypt's economy grew by over 5% during the first quarter of this fiscal year, and notably international tourists grew by 40% during the first nine months of this year.  Inflation has stabilized in the teens, and Egypt has notably been tightening its current account deficit.  The economy has also been supported by the healthy level of foreign exchange reserves, as well as strong export growth and gas production.  The market trades a considerable discount to MSCI Emerging Markets, despite all of these favorable characteristics, and is also the third cheapest market among MENA markets.  One key catalyst for the market includes its upcoming IPO program, which would support market sentiment and result in a higher stock market cap/GDP ratio.
This insight also includes a recap of my recent insights on Sri Lanka and Vietnam.  I posted a bullish insight on Sri Lanka's banking sector, despite some of the macro driven concerns, notably the poor performance of its currency during September and October of this year.  I also published another bullish insight on Vietnam's stock market, citing the pullback from EM/trade war turmoil as a buy opportunity for select areas.

Pakistan's economy has been through notable challenges since the beginning of 2018, and there will be more clarity at the end of this month, following further discussions with China and the IMF.  Select pockets of Pakistan's stock market are positioned to benefit, which includes companies that export products ( ie. textiles) and also banks on the back of rising interest rates.  Growth will continue to slow in the upcoming years(between 4-5%), and FDI will also likely continue its downtrend on the back of continued macro and political concerns.  The discount of the index will become more significant once macro fundamentals are more clear.
Another game changing event for Pakistan includes the potential for several constituents of MSCI Emerging Markets to be removed, which would further decrease its weighting, and perhaps even move it back to MSCI Frontier market status ( still waiting for more clarity from MSCI). This case with Pakistan is another piece of data that supports my preference for Vietnam to delay its EM upgrade, and to first benefit as the largest/2nd largest MSCI frontier market constituent.  Egypt's economy grew by over 5% during the first quarter of this fiscal year, and notably international tourists grew by 40% during the first nine months of this year.  Inflation has stabilized in the teens, and Egypt has notably been tightening its current account deficit.  The economy has also been supported by the healthy level of foreign exchange reserves, as well as strong export growth and gas production.  The market trades a considerable discount to MSCI Emerging Markets, despite all of these favorable characteristics, and is also the third cheapest market among MENA markets.  One key catalyst for the market includes its upcoming IPO program, which would support market sentiment and result in a higher stock market cap/GDP ratio.
This insight also includes a recap of my recent insights on Sri Lanka and Vietnam.  I posted a bullish insight on Sri Lanka's banking sector, despite some of the macro driven concerns, notably the poor performance of its currency during September and October of this year.  I also published another bullish insight on Vietnam's stock market, citing the pullback from EM/trade war turmoil as a buy opportunity for select areas.

Karachi Stock Exchange Kse100 Index (KSE100 INDEX)

Frontier and Emerging Market Update ( Pakistan and Egypt Focus)