Last checked at 23 Apr 2018 11:01
BlackRock Frontiers Investment Trust Plc - Portfolio UpdateBlackRock Frontiers Investment Trust Plc - Portfolio Update
PR Newswire
London, April 23
BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)
All information is at 31 March 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 | 0.0 | 2.8 | 14.5 | 61.7 | 86.6 | 105.5 |
| Net asset value | -2.3 | 3.8 | 12.4 | 49.6 | 86.0 | 101.2 |
| MSCI Frontiers Index (NR) | -0.9 | 1.4 | 13.4 | 32.9 | 63.8 | 63.7 |
| MSCI Emerging Markets Index (NR) | -3.6 | -2.2 | 11.4 | 36.3 | 38.1 | 39.4 |
| US Dollars: | ||||||
| Share price | 1.8 | 6.7 | 28.6 | 53.1 | 72.8 | 85.6 |
| Net asset value | -0.6 | 7.7 | 26.2 | 41.5 | 72.2 | 81.4 |
| MSCI Frontiers Index (NR) | 0.9 | 5.1 | 27.3 | 25.6 | 51.3 | 47.3 |
| MSCI Emerging Markets Index (NR) | -1.9 | 1.4 | 24.9 | 28.8 | 27.5 | 25.4 |
Sources: BlackRock and Standard & Poor’s Micropal
* 17 December 2010.
| At month end Ordinary Shares | |
| US Dollar | |
| Net asset value - capital only: | 218.08c |
| Net asset value - cum income: | 219.94c |
| Sterling: | |
| Net asset value - capital only: | 155.47p |
| Net asset value - cum income: | 156.79p |
| Share price: | 163.00p |
| Total assets (including income): | £303.4m |
| Premium to cum-income NAV: | 4.0% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 3.1% |
| Ordinary shares in issue: | 193,491,108 |
| 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 3.1% 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 2017 interim dividend of 2.70 cents per share announced on 25 May 2017 and paid to shareholders on 30 June 2017.
**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 | 38.0 | Argentina | 16.0 | |
| Consumer Staples | 12.5 | Kuwait | 12.1 | |
| Health Care | 9.1 | Vietnam | 9.6 | |
| Materials | 7.0 | Saudi Arabia | 7.5 | |
| Telecommunication Services | 6.0 | Nigeria | 7.1 | |
| Industrials | 5.8 | Romania | 6.7 | |
| Energy | 5.7 | Egypt | 6.4 | |
| Consumer Discretionary | 5.6 | Kazakhstan | 3.9 | |
| Real Estate | 5.2 | Bangladesh | 3.7 | |
| Information Technology | 1.6 | Kenya | 3.5 | |
| Utilities | 0.5 | Ukraine | 3.5 | |
| ----- | Morocco | 3.2 | ||
| Total | 97.0 | PAN-Middle East | 2.6 | |
| ----- | Philippines | 2.0 | ||
| Short positions | -2.9 | Slovenia | 1.9 | |
| ===== | Sri Lanka | 1.8 | ||
| Colombia | 1.7 | |||
| PAN-Asian | 1.5 | |||
| Tanzania | 1.3 | |||
| Estonia | 1.0 | |||
| ----- | ||||
| Total | 97.0 | |||
| ----- | ||||
| Short positions | -2.9 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 30.04 2017 % | 31.05 2017 % | 30.06 2017 % | 31.07 2017 % | 31.08 2017 % | 30.09 2017 % | 31.10 2017 % | 30.11 2017 % | 31.12 2017 % | 31.01 2018 % | 28.02 2018 % | 31.03 2018 % | |
| Long | 108.9 | 105.0 | 103.9 | 106.6 | 107.9 | 107.7 | 113.4 | 111.0 | 113.3 | 110.2 | 102.1 | 97.0 |
| Short | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 2.5 | 3.8 | 3.8 | 3.0 | 3.0 | 2.9 |
| Gross | 108.9 | 105.0 | 103.9 | 106.6 | 107.9 | 107.7 | 115.9 | 114.8 | 117.1 | 113.2 | 105.1 | 99.9 |
| Net | 108.9 | 105.0 | 103.9 | 106.6 | 107.9 | 107.7 | 110.9 | 107.2 | 109.5 | 107.2 | 99.1 | 94.1 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| The National Bank of Kuwait | Kuwait | 4.3 |
| YPF | Argentina | 3.7 |
| Equity Group | Kenya | 3.5 |
| Halyk Savings Bank | Kazakhstan | 3.5 |
| Banco Macro | Argentina | 3.3 |
| MHP | Ukraine | 3.2 |
| Zenith Bank | Nigeria | 3.0 |
| Mobile Telecommunications | Kuwait | 3.0 |
| United Bank for Africa | Nigeria | 2.8 |
| Orascom Construction | Egypt | 2.7 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:In March, the Company’s NAV fell by 0.6%* (on a US Dollar basis with net income reinvested). For reference, the MSCI Frontier Index (the Company’s benchmark) rose by 0.9%**, the MSCI Emerging Markets Index was down by 1.9%** and MSCI World Index was down by 2.3%** on a US Dollar basis, over the same period.
March continued to see increased volatility in the markets, with the sustained sell-off and general risk-off sentiment gathering momentum fuelled by trade war concerns and the first Federal Reserve rate hike. Frontier Markets were up compared to a decline in both Emerging and Developed Markets during the sell-off, once again showing their lower volatility and lower correlation to global markets.
For the Company, strong performances from stocks in Egypt, Kenya and Romania during the month, were insufficient to offset declines from Argentina, Nigeria, the Philippines and Vietnam.
Our holding in Equity Bank, in Kenya rose by 23% on the back of increased expectations of the lifting of the interest rate cap which would allow Kenyan banks to restart loan growth.
Our position in Egyptian engineering, procurement, and construction contractor, Orascom Construction, contributed positively, rising by 10%, as the company continued to win new projects in its main markets, Egypt and UAE. Egyptian medical diagnostics company, IDH, rose by 13% on the back of strong results showing the company’s pricing power and low market penetration level. Romanian banks also performed well, rising by 8% benefiting from ongoing strong domestic activity.
On the other hand, our exposure in a number of countries detracted from returns. The Argentinean market was one of the weaker global markets falling by 2.6%. Our positions in real estate company, Inversiones y Representaciones Sociedad Anónima (IRSA), which fell by 15% and oil company, YPF, which fell by 6% were significant detractors from performance.
In Nigeria the banks declined by 8% in March and hence our positions in Zenith Bank and United Bank for Africa detracted from returns.
Philippine tobacco company, LT Group, detracted from performance as the stock pulled back after a strong performance in previous months, however, performance within the Philippines was helped by a short position in the banking sector where we believe that excessive multiples are likely to contract in the context of accelerating inflation and increased pressure on the external balance of payments.
In Vietnam, performance of the Company’s holdings was not especially notable, whilst the country index rose strongly, up 7% over the month, which resulted in the Company’s underperformance relative to the index. Within our holdings, Mobile World Group detracted from performance as the stock fell nearly 10% as the grocery division is likely to take longer than analysts initially expected to break even.
As we are seeing more countries being reclassified from Frontier to Emerging Market status, there is the risk that the Frontiers Index loses the best performing countries and that concentration increases within the remaining index. Hence, we have been discussing with the Company’s Board a way to create a sustainable, consistent universe which allows us to access the markets which are fast growing, show low correlations to more developed markets and are inefficient, offering opportunity for alpha. At the end of March, we announced a vote for the expansion of the investment universe to include the ‘forgotten’ countries of the Emerging and Frontier Markets indices. As a result of a positive vote by over 99% of investors, with effect from 1 April 2018 the Company will be benchmarked against a bespoke index called the MSCI Emerging Markets ex Selected Countries + Frontier Markets + Saudi Arabia Index (USD, net return). The index excludes the largest 8 countries (Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan) with a combined weight of 85% on a market weighted basis of the MSCI Emerging Markets Index and includes the other 16 countries of the index, which tend to be less followed by investors in Emerging Markets. These ‘forgotten’ Emerging Market countries, share many characteristics with our historically defined Frontier Markets. We are now considering opportunities throughout the expanded investment universe and therefore will likely allocate a portion of the portfolio into some of the newer countries as and when opportunities present.
Despite the sell off and increased market concerns in 2018, we think that the expanded New Frontier Markets 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.
*Source: BlackRock, as at 31 March 2018.**Source: BlackRock, MSCI, as at 31 March 2018.
23 April 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