Last checked at 24 Sep 2018 14:38
BlackRock Frontiers Investment Trust Plc - Portfolio UpdateBlackRock Frontiers Investment Trust Plc - Portfolio Update
PR Newswire
London, September 24
BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)
All information is at 31 August 2018 and unaudited.
Performance at month end with net income reinvested.
| One month % | Three months % | One year % | Three years % | Five years % | Since Launch* % | |
| Sterling: | ||||||
| Share price | -6.8 | -7.1 | -5.1 | 56.1 | 54.2 | 82.9 |
| Net asset value | -5.6 | -5.9 | -4.6 | 45.3 | 54.8 | 82.2 |
| Benchmark (NR)** | -1.6 | 0.2 | 3.5 | 49.7 | 57.1 | 61.7 |
| MSCI Frontiers Index (NR) | -4.5 | -3.1 | -6.6 | 35.2 | 41.9 | 47.0 |
| MSCI Emerging Markets Index (NR) | -1.8 | -2.4 | -1.5 | 63.7 | 52.2 | 37.7 |
| US Dollars: | ||||||
| Share price | -7.7 | -9.3 | -4.2 | 32.1 | 29.8 | 53.1 |
| Net asset value | -6.5 | -8.1 | -3.7 | 23.1 | 30.3 | 52.2 |
| Benchmark (NR)** | -2.5 | -2.1 | 4.4 | 26.5 | 32.0 | 35.9 |
| MSCI Frontiers Index (NR) | -5.4 | -5.4 | -5.8 | 14.2 | 19.2 | 22.5 |
| MSCI Emerging Markets Index (NR) | -2.7 | -4.7 | -0.7 | 38.3 | 27.9 | 14.8 |
Sources: BlackRock and Datastream* 17 December 2010.** The Company’s benchmark changed from MSCI Frontier Markets Index to MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD) effective 1/4/2018.
| At month end Ordinary Shares | |
| US Dollar | |
| Net asset value - capital only: | 175.31c |
| Net asset value - cum income: | 181.84c |
| Sterling: | |
| Net asset value - capital only: | 134.88p |
| Net asset value - cum income: | 139.91p |
| Share price: | 143.00p |
| Total assets (including income): | £279.8m |
| Premium to cum-income NAV: | 2.2% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 3.6% |
| Ordinary shares in issue: | 200,016,108 |
| Ongoing charges**: | 1.4% |
| Ongoing charges plus taxation and performance fee: | 1.6% |
\* The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.6% and includes the 2017 final dividend of 4.20 cents per share declared on 4 December 2017 and paid to shareholders on 9 February 2018 and the 2018 interim dividend of 3.00 cents per share announced on 17 May 2018 and paid to shareholders on 29 June 2018.
**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2017.
| Sector Analysis | Gross market value as a % of net assets | Country Analysis | Gross market value as a % of net assets | |
| Financials | 31.0 | Argentina | 8.7 | |
| Real Estate | 14.7 | Indonesia | 8.6 | |
| Consumer Discretionary | 13.4 | Vietnam | 8.5 | |
| Materials | 9.8 | Thailand | 7.6 | |
| Consumer Staples | 8.5 | Egypt | 7.5 | |
| Health Care | 8.1 | Kuwait | 6.7 | |
| Industrials | 7.7 | Romania | 6.1 | |
| Energy | 7.3 | Saudi Arabia | 5.9 | |
| Telecommunication Services | 5.9 | Nigeria | 5.7 | |
| Information Technology | 1.3 | Qatar | 5.3 | |
| ----- | Ukraine | 5.0 | ||
| Total | 107.7 | United Arab Emirates | 4.8 | |
| ----- | Greece | 4.2 | ||
| Short positions | -6.4 | Hungary | 3.4 | |
| ===== | Kazakhstan | 3.3 | ||
| Malaysia | 2.8 | |||
| Poland | 2.2 | |||
| Kenya | 2.2 | |||
| Philippines | 2.1 | |||
| PAN-Africa | 1.8 | |||
| Tanzania | 1.1 | |||
| PAN-Asian | 1.1 | |||
| Morocco | 0.9 | |||
| Bangladesh | 0.8 | |||
| Panama | 0.7 | |||
| Sri Lanka | 0.6 | |||
| Estonia | 0.1 | |||
| ----- | ||||
| Total | 107.7 | |||
| ----- | ||||
| Short positions | -6.4 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 30.09 2017 % | 31.10 2017 % | 30.11 2017 % | 31.12 2017 % | 31.01 2018 % | 28.02 2018 % | 31.03 2018 % | 30.04 2018 % | 31.05 2018 % | 30.06 2018 % | 31.07 2018 % | 31.08 2018 % | |
| Long | 107.7 | 113.4 | 111.0 | 113.3 | 110.2 | 102.1 | 97.0 | 113.2 | 119.5 | 116.2 | 113.9 | 107.7 |
| Short | 0.0 | 2.5 | 3.8 | 3.8 | 3.0 | 3.0 | 2.9 | 3.8 | 4.2 | 4.7 | 5.1 | 6.4 |
| Gross | 107.7 | 115.9 | 114.8 | 117.1 | 113.2 | 105.1 | 99.9 | 117.0 | 123.7 | 120.9 | 119.0 | 114.1 |
| Net | 107.7 | 110.9 | 107.2 | 109.5 | 107.2 | 99.1 | 94.1 | 109.4 | 115.3 | 111.5 | 108.8 | 101.3 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Astra International | Indonesia | 4.5 |
| MHP | Ukraine | 3.5 |
| Ooredoo | Qatar | 3.4 |
| Chemical Works of Gedeon Richter | Hungary | 3.3 |
| Halyk Savings Bank | Kazakhstan | 3.2 |
| Emaar Properties | United Arab Emirates | 3.1 |
| Land & Houses Public Company Limited | Thailand | 3.1 |
| Indorama Ventures | Thailand | 3.0 |
| YPF | Argentina | 3.0 |
| Al Rajhi Bank (P-Note) | Saudi Arabia | 2.9 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:In July the Company’s NAV fell by 6.5%* (on a US Dollar basis with net income reinvested) versus its benchmark, the MSCI New Frontier benchmark, which fell by 2.5%**. For reference, its previous benchmark, the MSCI Frontiers Index, fell by 5.4%** and the MSCI Emerging Markets Index fell by 2.7%** (all performance figures are on a US Dollar basis with net income reinvested).
Emerging and Frontier Market equities erased their gains from July and suffered renewed selling pressure in August as investor attention once more turned to the impact of tightening global liquidity as a result of rising US interest rates and a strong dollar on the asset class. Amid this volatility many markets are seeing sharp sell offs and extreme currency moves, some more justified than others in our view, given their underlying economic fundamentals, fiscal and external account balances and policy choices.
Our overweight to Argentina was the largest detractor over the month with the market down 24% in USD terms as investors lost confidence in the country’s ability to fund itself given its fiscal and external account balances despite the funding agreement with the IMF (International Monetary Fund). Even a hike in interest rates to 60% couldn’t stop the slide in the Argentine currency. Our holdings in the financials were particularly badly hit with stocks down 30% or more. We have been on the wrong side of the market moves so far and are monitoring unfolding events closely. At the current exchange rate, the current account deficit should be eliminated and whilst external debt levels are high, a significant proportion of this is prefunded by the IMF and the feedthrough into the fiscal deficit is low given the long duration of government debt. Whilst it is impossible to categorically rule out a debt default by Argentina, given current yields, the extent of the currency devaluation and the IMF backstop, we think risk reward tilts in our favour by remaining long.
Our holding in Malaysian Energy services company Sapura Energy also detracted from returns as the stock sold off after announcing a rights issue. Post month end, the company also announced the sale of a stake in its exploration and production business to Austrian energy company, OMV for US$800m, valuing the business significantly above analyst expectations. We maintain our position in the company.
Performance was also hurt by positions in Nigeria, which fell more than 10% during the month. Whilst we note the increase in political risk in the run up to elections early 2019, we continue to believe that the stock prices of companies such as Zenith Bank, (which is currently trading on a 3 times price to earnings ratio and 14% dividend yield on consensus estimates), sufficiently discount these risks.
Greek bank results disappointed in August, impacting our holdings in National Bank of Greece and Alpha Bank which fell 13% and 16% respectively. Whilst the results missed our expectations, we think that the extent of the reaction to these results was excessive and we would expect better news on NPE (non-performing exposures) reductions (the key area where the results missed) in the second half of the year.
Our holding in Hungarian pharmaceutical company Gideon Richter (+9%) added to returns benefiting from strong results which included an upside surprise to margins. We believe the current valuation more than reflects any impact from the FDA (Food and Drug Administration) not approving its drug Esmya.
As one of the top performing countries over the month, holdings in Romania contributed positively to returns. Banks reported better than expected results as the economy continues to grow strongly.
We continue to be zero weighted in Turkey, concerned about the extent of foreign currency debt owed by the corporate sector especially. The market fell by 29% as investors panicked following the release of higher than expected inflation numbers, larger than expected current account deficit numbers and a perception that the government and central bank were taking insufficient action to address the problems.
We also remain zero weighted in Chile, where we feel that valuations are insufficiently attractive to participate in the market. This positioning was positive for relative returns over the month.
Emerging and Frontier Markets have de-rated considerably. Whilst further rises in US rates would likely put pressure on some emerging market Central Banks to mirror these increases, we believe that in general emerging markets are better positioned to weather this strain than they were in the previous taper tantrums of 2013 and 2015. At current levels, Emerging Markets are trading at tenth percentile relative to history on price to book valuations, which we believe is an attractive level. In aggregate the wide subset of countries that make up our investible universe continue to exhibit strong GDP (Gross Domestic Product) growth, have low government debt levels, and represent an opportunity to invest in companies with strong cash flow and high dividend yields, on some of the lowest valuations in the world.
Sources:*BlackRock as at 31 August 2018**MSCI as at 31 August 2018
24 September 2018
ENDS
Latest information is available by typing www.blackrock.co.uk/brfi on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on BlackRock’s website (or any other website) is incorporated into, or forms part of, this announcement.