Frontier Markets Update

Strategy ML London Traded Frontier Stocks Index

MidLincoln Research

ML London Traded Frontier Stocks Index

basketname	weekch	monthch	ytdch	yearch
ML London Traded Frontier Stocks Index	-3.59	-14.40	-11.65	-14.89

Select Equity Indexes Yields

name	weekch	monthch	ytdch	yearch
Russian Trading System Cash Index	-12.35	-15.63	-14.61	-16.08
S&P 500 Index	-3.23	-6.24	-8.87	-6.89
Hong Kong Hang Seng Index	-5.38	-11.25	-11.53	-18.36
Ibovespa Brasil Sao Paulo Stock Exchange Index	-6.78	-13.60	-12.49	-22.60
S&P BSE SENSEX Index	-2.43	-5.22	-6.40	-14.02

Best Stocks 1m in USD %ch

Name	ChngePct	Country
Grupo Clarin SA (GCLA:LI)	0.77	Argentina
Oil & Gas Development Co Ltd (OGDC:LI)	0.47	Pakistan
Lucky Cement Ltd (LKCS:LI)	0.00	Pakistan
Bank Muscat SAOG (BKM:LI)	0.00	Oman
Ooredoo QSC (ORDS:LI)	0.00	Qatar
Depa Ltd (DEPS:LI)	0.00	United Arab Emirates
Trader Media East Ltd (TME:LI)	0.00	Netherlands
MCB Bank Ltd (MCBS:LI)	0.00	Pakistan
Diamond Bank PLC (DBPA:LI)	0.00	Nigeria
Zenith Bank PLC (ZENB:LI)	0.00	Nigeria

Worst Stocks 1m in USD %

Name	ChngePct	Country
Commercial Bank QSC/The (CBQS:LI)	-41.92	Qatar
Kazkommertsbank JSC (KKB:LI)	-26.33	Kazakhstan
KCell JSC (KCEL:LI)	-20.51	Kazakhstan
Avangardco Investments Public Ltd (AVGR:LI)	-18.24	Ukraine
United Bank Ltd/Pakistan (UBLS:LI)	-17.91	Pakistan
Halyk Savings Bank of Kazakhstan JSC (HSBK:LI)	-17.54	Kazakhstan
Ferrexpo PLC (FXPO:LN)	-16.66	Switzerland
Aluminium Bahrain BSC (ALBH:LI)	-15.79	Bahrain
MHP SA (MHPC:LI)	-12.57	Ukraine
Solidere (SLED:LI)	-11.82	Lebanon

Best Stocks YTD in USD %

Name	ChngePct	Country
Avangardco Investments Public Ltd (AVGR:LI)	4.00	Ukraine
Oil & Gas Development Co Ltd (OGDC:LI)	0.47	Pakistan
Lucky Cement Ltd (LKCS:LI)	0.00	Pakistan
Trader Media East Ltd (TME:LI)	0.00	Netherlands
Depa Ltd (DEPS:LI)	0.00	United Arab Emirates
Ooredoo QSC (ORDS:LI)	0.00	Qatar
Commercial Bank QSC/The (CBQS:LI)	0.00	Qatar
Bank Muscat SAOG (BKM:LI)	0.00	Oman
Chagala Group Ltd (CHGG:LI)	0.00	Kazakhstan
Bank Audi SAL (BQAD:LI)	0.00	Lebanon

Worst Stocks YTD in USD %

Name	ChngePct	Country
KCell JSC (KCEL:LI)	-23.27	Kazakhstan
United Bank Ltd/Pakistan (UBLS:LI)	-17.91	Pakistan
KAZ Minerals PLC (KAZ:LN)	-11.79	United Kingdom
MHP SA (MHPC:LI)	-10.22	Ukraine
Ferrexpo PLC (FXPO:LN)	-10.19	Switzerland
Kazkommertsbank JSC (KKB:LI)	-9.80	Kazakhstan
BGEO Group PLC (BGEO:LN)	-8.96	United Kingdom
KazMunaiGas Exploration Production JSC (KMG:LI)	-8.33	Kazakhstan
Solidere (SLED:LI)	-7.62	Lebanon
TBC Bank JSC (TBCB:LI)	-5.94	Georgia

ML London Traded Frontier Stocks Index Stock News

ML London Traded Frontier Stocks Index

By: Guest Analyst: Sophie Polovkova

Comment
Chart: According to Worldbank Doing Business Report 2015, Pakistan has fairly impressive results in terms of investor protection. the higher the values to 10, the greater the exent of the corresponding quality.
Also Ukraine becomes a member of UN security council
Source: Bloomberg,Doing Business 2015. Going Beyond Efficiency

ML Frontier Markets basket fell 2.24% for the past week as the MSCI Emerging Markets Index dropped 3.56%. Over the past month the frontier markets have demonstrated mostly negative dynamics largely due to the growing uncertainty engendered by the Chinese stock market rout and steadily falling oil price. Best-performing companies in the basket were Grupo Clarin SA, Argentina (GCLA:LI) and Oil & Gas Development Co Ltd, Pakistan (OGDC:LI) up 0.77% and 0.47% respectively. At the same, many companies, notably in the financial sector, showed negative dynamics: Commercial Bank QSC, Quatar (CBQS:LI) has lost 41.92%, while the second-worst performer Kazkommertsbank JSC, Kazakhstan (KKB:LI) was down 26.33%.

Groupo Clarin SA has also demonstrated impressive growth: up 91.75% over the year, the largest after United Bank Ltd, Pakistan (UBLS:LI) which saw 127.31% increase for the same period. The latter, however, exhibited negative monthly growth falling 17.91%, arguably reflecting the general banking industry dynamics in the beginning of January.

Frontier Markets basket dividend yields look significantly more attractive than GEM Average. One year return in this sector is 860 basis points higher than GEM Average. Utilities sector is doing better in terms of both dividend yield (5.9% vs. 3.1%) and one year return (3.5% vs. -5.6%).

Among MidLincoln top 5 picks for long position are mostly banks, including United Bank Ltd, BGEO Group PLC (BGEO:LN), TBC Bank JSC (TBCB:LI) and Zenith Bank PLC (ZENB:LI), and also Grupo Clarin SA, an Argentinean media conglomerate. Our less favored stpcls s are Kazakh companies Kazkommertsbank JSC (KKB:LI), KCell JSC (KCEL:LI) and KazMunaiGas Exploration Production JSC (KMG:LI), and KAZ Minerals PLC (KAZ:LN) and Oil & Gas Development Co Ltd (OGDC:LI) based in the UK and Pakistan respectively.

Pakistan: first results of reforms
Last week the IMF Executive Board acknowledged the success of economic reforms introduced in Pakistan in 2013. For these three years GDP growth rate has increased from 3.7 to 4.2 percent per year. Fiscal deficit was reduced from 8.5 to 5.4 percent of GDP. The inflation has been modest in the beginning of 2016, slightly over 4%, down from 11.9% in 2013 (and 20.3% in 2008).

The country is strengthening its economic and political ties with China and India. Its main stock market index (KSE100) shows a clear four-year upward growth trend: since January 2012 is has grown by over 180% (see the graph below). Its financial sector companies including United Bank Limited and MCB Bank arguably have a good upside potential.

Comment: the higher the values to 10, the greater the exent of the corresponding quality In other words, even though more reforms are needed to ensure the economy�s stability Pakistan has clearly made big strides on the path of promoting economic development.

Ukraine becomes a member of UN Security Council

This year, on the 1st of January Ukraine officially became a member of the United Nations Security Council. The country has won its membership in October 2015, along with Egypt, Senegal, Uruguay and Japan. These countries are to replace Chad, Chile, Jordan, Lithuania and Nigeria on the council. Ukraine�s inclusion would probably act as a counterweight to Russia, which is one of the five permanent members with a veto-right (the other four are the United States, Britain, France and China). Also, this might help to break the impasse over the Donbass region conflict and the civil war in Syria and intensify Ukraine�s political ties with the United States and countries of the EU.

ML London Traded Frontier Stocks Index is a set of select stocks traded on LSE as GDRs or in the main market
Country Composition
country Weight %
Kazakhstan 16.67
Pakistan 13.33
Lebanon 13.33
Nigeria 6.67
Qatar 6.67
Ukraine 6.67
United Kingdom 6.67
Argentina 3.33
Romania 3.33
Vietnam 3.33
Netherlands 3.33
United Arab Emirates 3.33
Oman 3.33
Georgia 3.33
Bahrain 3.33
Switzerland 3.33
Sector Composition
Industry Weight %
Banks 43.33
Real Estate Owners & Developers 10.00
Telecom Carriers 6.67
Base Metals 6.67
Exploration & Production 6.67
Cable & Satellite 3.33
Elec & Gas Mktg & 00002E55 Trading 3.33
Publishing & Broadcasting 3.33
Building Sub Contractors 3.33
Agricultural Producers 3.33
Packaged Food 3.33
Steel Raw Material Suppliers 3.33
Cement & Aggregates 3.33
Key Basket Multiples
Stocks Total MCap US mn Payout Ratio Div Yield PE NetMargin 1yr Return
30 69424.1 0.8 4.1 8.19 23.99 -3.1
Results
value stock Country Industry MCap US mn DividendYield PE PS NetMarginPct PayoutRatio 52wkchange Score
Grupo Clarin SA GCLA:LI Argentina Cable & Satellite 2587.00 0.98% - - 0.00 -0.00 91.75 92.74
Aluminium Bahrain BSC ALBH:LI Bahrain Base Metals 1363.00 3.04% - - 0.00 -0.00 -20.41 -19.42
TBC Bank JSC TBCB:LI Georgia Banks 494.75 3.38% 6.20 1.54 24.84 20.96 -17.40 23.19
Chagala Group Ltd CHGG:LI Kazakhstan Real Estate Owners & Developers 0.00 - - - 0.00 0.00
Halyk Savings Bank of Kazakhstan JSC HSBK:LI Kazakhstan Banks 1350.00 13.64% - - 0.00 -0.00 -37.09 -36.10
KazMunaiGas Exploration Production JSC KMG:LI Kazakhstan Exploration & Production 3003.00 5.37% - - 0.00 -0.00 -46.33 -45.34
KCell JSC KCEL:LI Kazakhstan Telecom Carriers 750.00 29.20% - - 0.00 -0.00 -57.00 -56.01
Kazkommertsbank JSC KKB:LI Kazakhstan Banks 488.47 - - - 0.00 0.00 -67.76 -66.77
Byblos Bank SAL BYB:LI Lebanon Banks 848.27 8.81% - - 0.00 -0.00 6.08 7.07
Bank Audi SAL BQAD:LI Lebanon Banks 2398.00 6.67% - - 0.00 -0.00 1.98 2.97
BLOM Bank SAL BLBD:LI Lebanon Banks 2077.00 6.84% - - 0.00 -0.00 0.20 1.19
Solidere SLED:LI Lebanon Real Estate Owners & Developers 1805.00 0.93% - - 0.00 -0.00 -6.44 -5.45
Trader Media East Ltd TME:LI Netherlands Publishing & Broadcasting 220.00 - - 3.67 0.00 0.00 0.00 0.99
Zenith Bank PLC ZENB:LI Nigeria Banks 4709.00 1.79% - - 0.00 -0.00 6.79 7.78
Diamond Bank PLC DBPA:LI Nigeria Banks 0.00 1.47% - - 0.00 -0.00
Bank Muscat SAOG BKM:LI Oman Banks 3151.00 4.50% - - 0.00 -0.00 -4.90 -3.91
United Bank Ltd/Pakistan UBLS:LI Pakistan Banks 2051.00 7.61% - - 0.00 -0.00 127.31 128.30
Oil & Gas Development Co Ltd OGDC:LI Pakistan Exploration & Production 4537.00 5.45% - - 0.00 -0.00 -50.20 -49.21
Lucky Cement Ltd LKCS:LI Pakistan Cement & Aggregates 1496.00 1.86% - - 0.00 -0.00 1.86 2.85
MCB Bank Ltd MCBS:LI Pakistan Banks 1948.00 8.82% - - 0.00 -0.00 -31.53 -30.54
Ooredoo QSC ORDS:LI Qatar Telecom Carriers 25626.00 1.66% - - 0.00 -0.00 1.37 2.36
Commercial Bank QSC/The CBQS:LI Qatar Banks 3462.00 8.24% - - 0.00 -0.00 -35.49 -34.50
Electrica SA ELSA:LI Romania Elec & Gas Mktg & 00002E55 Trading 1038.00 5.94% - - 0.00 -0.00 3.48 4.47
Ferrexpo PLC FXPO:LN Switzerland Steel Raw Material Suppliers 178.06 20.32% 2.03 0.16 7.88 41.25 -52.22 -4.12
MHP SA MHPC:LI Ukraine Agricultural Producers 919.30 5.45% - 0.74 0.00 -0.00 -1.53 -0.54
Avangardco Investments Public Ltd AVGR:LI Ukraine Packaged Food 79.84 - - 0.34 0.00 0.00 -39.02 -38.03
Depa Ltd DEPS:LI United Arab Emirates Building Sub Contractors 334.41 - - - 0.00 0.00 0.00 0.99
BGEO Group PLC BGEO:LN United Kingdom Banks 1086.80 3.47% 10.10 2.65 26.24 35.05 -4.60 47.58
KAZ Minerals PLC KAZ:LN United Kingdom Base Metals 651.49 - - - 0.00 0.00 -57.57 -56.58
HAGL JSC HAG:LI Vietnam Real Estate Owners & Developers 771.73 - - - 0.00 0.00 0.00 0.99

Index Sector Valuations vs GEM Average
Sector Sector MCap US mn Sector MCap Share in Total Gem Sector Share In Total GEM GEM Sector MCAP USmn Payout Ratio GEM Payout Ratio Div Yield GEM Div Yield PE PEGEM PE Discount vs GEM NetMargin NetMarginGEM Margin Diff. vs GEM 1yr Return GEM 1yr Return
Communications 29183.0 42.0 10.3 794505.8 0.0 43.3 2.3 3.2 18.2 13.6 7.9 -0.7
Consumer Staples 999.1 1.4 7.5 584775.3 0.0 38.0 5.5 1.8 28.2 10.3 -4.5 12.3
Energy 7540.0 10.9 12.6 973390.4 0.0 40.8 5.4 4.4 12.4 9.7 -48.7 -21.0
Financials 26641.0 38.4 32.8 2543065.7 1.8 26.0 5.8 4.0 8.9 8.8 1.1 25.8 20.4 -5.4 -0.2 3.2
Industrials 334.4 0.5 5.8 453138.2 0.0 23.4 1.8 18.6 11.4 0.0 22.9
Materials 3688.5 5.3 7.6 590209.4 2.0 27.5 3.5 3.1 2.0 18.1 -89.0 7.9 9.8 1.9 -19.5 -0.1
Utilities 1038.0 1.5 3.7 288099.0 0.0 32.2 5.9 3.1 12.4 13.4 3.5 -5.6

Top 5 ML London Traded Frontier Stocks Index Long Picks
value stock Country Industry MCapUSDmn DividendYield PE PS NetMarginPct PayoutRatio 52wkchange Score
United Bank Ltd/Pakistan UBLS:LI Pakistan Banks 2051.00 7.61% - - 0.00 -0.00 127.31 128.30
Grupo Clarin SA GCLA:LI Argentina Cable & Satellite 2587.00 0.98% - - 0.00 -0.00 91.75 92.74
BGEO Group PLC BGEO:LN United Kingdom Banks 1086.80 3.47% 10.10 2.65 26.24 35.05 -4.60 47.58
TBC Bank JSC TBCB:LI Georgia Banks 494.75 3.38% 6.20 1.54 24.84 20.96 -17.40 23.19
Zenith Bank PLC ZENB:LI Nigeria Banks 4709.00 1.79% - - 0.00 -0.00 6.79 7.78

Top 5 ML London Traded Frontier Stocks Index Short Picks
value stock Country Industry MCapUSDmn DividendYield PE PS NetMarginPct PayoutRatio 52wkchange Score
Kazkommertsbank JSC KKB:LI Kazakhstan Banks 488.47 - - - 0.00 0.00 -67.76 -68.63
KAZ Minerals PLC KAZ:LN United Kingdom Base Metals 651.49 - - - 0.00 0.00 -57.57 -58.44
KCell JSC KCEL:LI Kazakhstan Telecom Carriers 750.00 29.20% - - 0.00 -0.00 -57.00 -57.87
Oil & Gas Development Co Ltd OGDC:LI Pakistan Exploration & Production 4537.00 5.45% - - 0.00 -0.00 -50.20 -51.07
KazMunaiGas Exploration Production JSC KMG:LI Kazakhstan Exploration & Production 3003.00 5.37% - - 0.00 -0.00 -46.33 -47.20
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Top 10 Frontier Focused Funds by Inflows Last Week

Fund Name	fund flow mn$	Total Assets mn$
BELLEVUE FUNDS LUX - BB AFRICAN OPPORTUNITIES - EUR (M0U4)	3.7	68.5
BELLEVUE FUNDS LUX - BB AFRICAN OPPORTUNITIES - USD (BBAFOBU)	1.8	62.9
ISPX RECORD FOR GLOBAL X NEXT EMERGING & FRONTIER ETF (EMFM)	1.8	82.8
DB X-TRACKERS S&P SELECT FRONTIER UCITS ETF (XSFD)	0.3	44.7
OLD MUTUAL FINANCIAL SERVICES FUND - A (OLDMFSA)	0.2	39.5
PRESCIENT AFRICA EQUITY FUND (PRAFEA1)	0.0	3.4
IBK FRONTIER MIDDLE EAST SECURITIES FEEDER INVESTMENT TRUST - EQUITY - C 1 (4789505)	0.0	0.2
EUROBANK LF FUND OF FUNDS - BRIC - USD (EFGBRUS)	-0.2	33.5
DB X-TRACKERS S&P SELECT FRONTIER UCITS ETF (XSFR)	-0.8	44.5
SANLAM UNIVERSAL FUNDS PLC - SANLAM AFRICAN FRONTIER MARKETS FUND - D$ (SANAFDD)	-2.1	63.9

Top 10 Frontier Focused Funds by Outflow Last Week

Fund Name	fund flow mn$	Total Assets mn$
SANLAM UNIVERSAL FUNDS PLC - SANLAM AFRICAN FRONTIER MARKETS FUND - D$ (SANAFDD)	-2.1	63.9
DB X-TRACKERS S&P SELECT FRONTIER UCITS ETF (XSFR)	-0.8	44.5
EUROBANK LF FUND OF FUNDS - BRIC - USD (EFGBRUS)	-0.2	33.5
IBK FRONTIER MIDDLE EAST SECURITIES FEEDER INVESTMENT TRUST - EQUITY - C 1 (4789505)	0.0	0.2
PRESCIENT AFRICA EQUITY FUND (PRAFEA1)	0.0	3.4
OLD MUTUAL FINANCIAL SERVICES FUND - A (OLDMFSA)	0.2	39.5
DB X-TRACKERS S&P SELECT FRONTIER UCITS ETF (XSFD)	0.3	44.7
ISPX RECORD FOR GLOBAL X NEXT EMERGING & FRONTIER ETF (EMFM)	1.8	82.8
BELLEVUE FUNDS LUX - BB AFRICAN OPPORTUNITIES - USD (BBAFOBU)	1.8	62.9
BELLEVUE FUNDS LUX - BB AFRICAN OPPORTUNITIES - EUR (M0U4)	3.7	68.5

ML London Traded Frontier Stocks Index

Select Equity Indexes Yields

ML London Traded Frontier Stocks Index Stock News

Oil & Gas Development Co Ltd

BGEO Group PLC

Ferrexpo PLC

KAZ Minerals PLC

Avangardco Investments Public Ltd

KazMunaiGas Exploration Production JSC

KCell JSC

TBC Bank JSC

MHP SA

Halyk Savings Bank of Kazakhstan JSC

Solidere

Chagala Group Ltd

Bank Muscat SAOG

Electrica SA

Commercial Bank QSC/The

Ooredoo QSC

Depa Ltd

Trader Media East Ltd

Bank Audi SAL

MCB Bank Ltd

Diamond Bank PLC

Zenith Bank PLC

Aluminium Bahrain BSC

HAGL JSC

BLOM Bank SAL

Byblos Bank SAL

Kazkommertsbank JSC

Grupo Clarin SA

United Bank Ltd/Pakistan

Lucky Cement Ltd

ML London Traded Frontier Stocks Index

Comment

Chart: According to Worldbank Doing Business Report 2015, Pakistan has fairly impressive results in terms of investor protection. the higher the values to 10, the greater the exent of the corresponding quality. Also Ukraine becomes a member of UN security council

Pakistan: first results of reforms

Ukraine becomes a member of UN Security Council

ML London Traded Frontier Stocks Index is a set of select stocks traded on LSE as GDRs or in the main market

Country Composition

Sector Composition

Key Basket Multiples

Results

Index Sector Valuations vs GEM Average

Top 5 ML London Traded Frontier Stocks Index Long Picks

Top 5 ML London Traded Frontier Stocks Index Short Picks

ML London Traded Frontier Stocks Index MidLincoln ResearchMidLincoln.com

Chart: According to Worldbank Doing Business Report 2015, Pakistan has fairly impressive results in terms of investor protection. the higher the values to 10, the greater the exent of the corresponding quality.
Also Ukraine becomes a member of UN security council