East Capital Global Frontier Markets

Frontier markets ended the year strongly, with positive momentum extending into the final quarter. East Capital Global Frontier Markets delivered a return of 4.1% in 4Q 2025, bringing the full-year performance up to 25.7%, compared with 46.0% for the benchmark index. Although returns lagged behind the benchmark during this exceptionally strong index year, the strategy delivered three consecutive years of USD returns in excess of 20%, equating to a 95% gain over the past three years. 

The strong absolute performance was supported by favourable macroeconomic conditions, renewed investor interest in emerging and frontier assets and the absence of any major negative outliers. However, relative underperformance was driven by a narrow set of factors. In Vietnam, a local, sentiment-driven rally in index-heavy Vingroup-related stocks, which we continue to view as expensive and of structurally lower quality, lifted benchmark performance but this was not reflected in our portfolio. Meanwhile, FPT Corporation, a long-standing core holding and one of the most consistent compounders in the frontier universe, paused after an exceptional run amid foreign investor profit-taking. Collectively, these Vietnam-specific, flow-driven dynamics largely explain the divergence in an otherwise very strong year for the strategy. 

Egypt remained a key positive contributor in the fourth quarter. Our core holding, Commercial International Bank (CIB), returned 17.3%, driven by a strong third-quarter earnings report with broad-based beats. Despite some re-rating during the year, the bank continues to trade at attractive valuation multiples of 5.3x P/E and 1.3x P/B for 2026, with an expected ROE of nearly 30%. Fawry, Egypt’s leading fintech platform, gained 14.7% in Q4, bringing its full-year return to 99.4%. With an expected profit CAGR of around 40% over the coming years, we continue to see a highly favourable risk-reward profile at a 2026e P/E of 17.2x. During the quarter, we also broadened our Egyptian exposure by adding Abu Dhabi Islamic Bank Egypt, one of the highest ROE banks in the market, following its growth-driven rights issue. With inflation declining and a rate-cut cycle underway, we see Egypt re-emerging as an increasingly attractive market heading into 2026. 

Morocco was one of the strongest contributors towards the end of the year. Although the market declined by 4.1% in USD terms during the quarter, following a strong year driven by the anticipation of infrastructure investment related to the 2032 World Cup, we selectively increased our exposure through recent IPOs. Notably, SGTM, the country’s largest construction group, delivered an 118% return on its USD 550 million listing by year-end. 

Elsewhere in Africa, Nigeria experienced heightened volatility as a proposed capital gains tax weighed on investor sentiment, though subsequent clarifications did improve the proposal. Although the final framework has yet to be announced, equities have recovered modestly, with our largest Nigerian holding, Guaranty Trust Bank, returning 1.6% in Q4. Despite delivering a 99.8% USD return in 2025, the stock continues to trade at compelling valuation levels, with 2026e multiples of 3.4x P/E and 0.9x P/B, as well as a dividend yield above 10%. 

In Kazakhstan, Halyk Bank was a significant positive contributor during the quarter, with its stock rising by 19.9%. We took advantage of the strength and liquidity of this movement to participate in a placement at a discount of nearly 10% to the prevailing market price. Despite having gained around 80% in USD terms in 2025, Halyk continues to trade at undemanding valuation levels, with an expected P/E ratio 4.3x in 2026 and a dividend yield of around 14%. Strong capitalisation, resilient earnings and disciplined capital returns underpin the investment case and support its continued contribution to portfolio performance. 

Vietnam’s performance continued to detract from relative performance in Q4, making 2025 an outlier year for the market within the portfolio, with a small number of index-heavy but unattractive stocks performing well. That said, Vietnam received positive confirmation regarding its expected upgrade to the FTSE Emerging Markets Index, with September 2026 indicated as the likely implementation date. With GDP growth of 8.0% in 2025 and an official target of 10% in the coming years, supported by infrastructure investment and a shift towards a more private-sector-led economy, Vietnam enters 2026 with one of the strongest structural growth profiles in our investment universe, albeit with elevated volatility following a strong rally. In this environment, our focus remains on selectively owning high-quality Vietnamese companies where long-term earnings visibility and governance discipline outweigh short-term index-driven market fluctuations. 

Saudi Arabia was another detractor as early-quarter optimism surrounding the potential easing of foreign ownership restrictions faded once it became clear that any regulatory changes were more likely a 2026 story. Despite operational performance being broadly in line with expectations, our holdings in Tawuniya and Derayah Financial declined 15.9% and 19.7%, respectively. While both stocks now trade at more attractive 2026e P/E multiples of 12.7x and 10.4x, we reduced our exposure due to persistently weak market sentiment. 

As in recent years, frontier markets continue to deliver on their core value proposition of attractive risk-adjusted returns, supported by low correlations across a diverse universe of approximately 20 markets. Looking ahead to 2026, this case is further strengthened by robust structural growth and improving financial conditions. Frontier economies are expected to grow by 4-4.5% on average, supported by large, young populations and ongoing reform momentum, meanwhile easing monetary conditions as central bank rate cuts are increasingly supporting domestic investment and consumption. Improving global risk appetite is also alleviating pressure on local currencies and attracting renewed interest from foreign investors to frontier equity markets. 

Importantly, frontier markets are increasingly offering investors an attractive alternative to elevated valuations and the risk of a too heavy concentration of returns in a narrow set of AI-related stocks, which may prove unsustainable. In our view, this diversification does not compromise return potential, in fact, it may enhance it. This is underpinned by compelling valuations and consistent mid-teens earnings growth, which is primarily driven by domestic dynamics rather than exposure to crowded global themes. 

Despite its strong performance, with approximately 25% annualised returns over the past three years, the portfolio trades at just 6.3x 2026e earnings. This is close to historical lows, representing discounts of 54% and 69% to emerging and developed markets, respectively. We remain disciplined in our portfolio construction, maintaining broad regional diversification while actively rotating into new opportunities as we position the strategy for a constructive outlook moving into 2026. 

Performance in USD net of fees.

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