Despite having a sluggish performance in the domestic stock market, Bangladesh emerged as a leading 'return contributor' for Asian Frontier Fund (AFF) in last year.
Hong Kong-based Asia Frontier Capital (AFC) Limited is a fund management company specialises in investing in high growth Asian frontier economies by managing the AFC Asian Frontier Fund and the AFC Vietnam Fund.
'Breaking down 2014 performance country wise, on a gross return basis, the leading return contributors within fund were Pakistan, Vietnam, Bangladesh and Sri Lanka, in that order,' said the annual review of the AFC, revealed second week in January this year.
The review report also mentioned that these four countries make up 68 percent of AFC's fund as of December 2014 and historically these four countries have been a majority of the portfolio.
The fund puts around 13 per cent of it's total investment to Bangladesh market, the data reveals.
The report also refers to five stocks which provided the highest returns on investment without mentioning specific names. These are: a pharmaceutical, a consumer beverage and a tobacco company from Pakistan; a pharmaceutical company from Bangladesh, and a consumer-focused conglomerate from Sri Lanka.
'All of these five companies were part of our top 20 holdings during the year except for the Pakistani tobacco company, which we exited and booked profit on in the beginning of second quarter,' said the report.
The first one invests in public equities of Asian frontier countries that are seeing increasing consumption due to favourable demographic trends, rising incomes and high economic growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh and 12 other countries.
Less advanced capital markets from the developing world are known as frontier markets. They have invest-able stock markets that are less established than those in the emerging markets like China and India.
Bangladesh's Outlook Better
The AFF expects better return from Bangladesh in this year taking the political risk in consideration.
'Political protests can be an issue going forward but these events have occurred in the past as well and companies have continued to deliver numbers,' said AFF.
On it's outlook, it also said, 'The beginning of 2014 witnessed political protests due to the election period, but things have stabilised since then. We continue to like Bangladesh as we think it provides a good consumer story with a population of close to 160 million and a GDP/capita of $1,100.'
According to AFF, consumer companies in the country will be benefited due to rise in income level in future. 'Therefore we like the long term story of consumer related stocks in Bangladesh. We think lower crude oil prices will be a positive for the economy and also for consumer stocks in general.'
AFF also underscored the macroeconomic performance of Bangladesh and termed it better compare to Pakistan and Sri Lanka as the country has managed to have a current account surplus through increased exports, kept its fiscal deficit under control (3.4 percent of GDP), and has not built up high levels of government debt (35 percent of GDP).
The fund, however, put a note of caution on future investment as it said, 'Valuations are not cheap in Bangladesh and we will need to be selective in our investments.'
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