Utilico Emerging Markets Regulatory News (UEM)

15 August 2023

UTILICO EMERGING MARKETS TRUST PLC

(LEI Number: 2138005TJMCWR2394O39)

Publication of monthly factsheet

The latest monthly factsheet for Utilico Emerging Markets Trust plc ("UEM" or the "Company") will shortly be available through the Company's website at:

https://www.uemtrust.co.uk/investor-relations/factsheet-archive

Monthly commentary

PERFORMANCE

UEM's NAV total return increased 3.1% in July, behind the MSCI Emerging Markets total return Index ("MSCI") which was up by 5.1% in Sterling terms. Year to date, UEM's NAV total return continues to be strong, increasing by 13.3% and significantly outperforming the MSCI EM Index, which was up by 4.8% in Sterling terms over the same period.

Equity markets continued to be positive in July with most markets ending in positive territory supported by global inflation which appears to be slowing. The US Federal Reserve increased interest rates by 25 basis points to 5.5% as expected; however, it remained non-committal as to whether or not there would be a further rise in September. Market expectations are also growing that the US is heading for a soft landing through controlling inflation without slowing economic growth. For example, July's US CPI data was lower than expected, whilst reported US second-quarter GDP growth was above expectations.

The European Central Bank (ECB) also followed suit increasing the deposit rate in July, in line with expectations by 25bps to 3.75% with Christine Lagarde, the ECB president, indicating that the central bank might be close to the end of the rate rising cycle as inflationary pressures continue to ease.

The S&P 500 Index was up by 3.1% over the month whilst the Eurostoxx Index was up by 1.6%.

The majority of emerging markets in July outperformed the developed markets. Within Asia, China's Shanghai Composite Index was up by 2.8% and the Hong Kong Hang Seng Index was up by 6.1% as the Chinese government announced new measures to revive consumption. In addition, the Chinese central bank, the People's Bank of China (PBOC), pledged to support the development of the Chinese real estate market by reducing housing loan interest rates and down payment ratios. The PBOC also raised market expectation that there will be a reduction in the reserve requirement ratio for domestic lenders. 

Vietnam's Ho Chi Minh Index also witnessed strong performance in July, up by 9.2% as the stock market saw revived backing from local retail investors. Their confidence was boosted by an improvement in GDP growth numbers in the second quarter from 3.3% to 4.1% as well as favourable government support measures. The Malaysian Bursa Index was also up by 6.0% in July and Thailand's Set by 3.5%. 

Within Latam, the Brazilian Bovespa was up by 3.3% as the market continued to anticipate the central bank would cut rates at the beginning of August. Elsewhere in Latam, Chile was the outperformer with the IPSA Index up by 10.5%, as the central bank announced a bigger than expected interest rate cut of 100bps to 10.25% on the back of an improvement in the economic outlook. The Mexican MEXBOL Index was up by 2.4%.

In the currency markets Sterling strengthened against both the Euro and US Dollar by 0.1% and 1.2% respectively. However, Sterling's performance was mixed against the emerging currencies, appreciating 1.5% against the Indian Rupee but depreciating 0.2% against the Brazilian Real, 1.4.% against the Mexican Peso and 0.4% against the Chinese Renminbi.

PORTFOLIO

There were two changes to the top thirty holdings, with Grupo Traxion and Ocean Wilsons Holdings replacing Engie Brasil and Telelink Business Services, primarily due to relative performance.

Grupo Traxion, a Mexican land transportation and logistics company, has re-entered the top thirty. It is currently benefitting from nearshoring as it is operating in the cargo, logistics solutions, and personnel and student transportation segments. Ocean Wilsons Holdings has also re-entered the top thirty and is a UK listed investment company which operates as a maritime service provider, through its Brazilian subsidiaries.

Twenty-two of the top thirty companies saw their stock price increase in July, with eight companies stock price gaining more than 5.0%. The strong performers in July were Trade Transport Services ("TTS"), FPT Corp ("FPT") and Engie Energia Chile ("ECL") which rose by 17.9%, 13.7% and 12.2% respectively. TTS and FPT saw strong share price performance on the back of solid 2Q23 results, whilst ECL continued to benefit from recovery in the broader Chilean market as well as improved rainfall providing relief to elevated spot prices, reducing the excess costs which ECL is having to bear given its heavily over-contracted energy position. Vinacapital was also up by 10.3%, marginally up against the Vietnamese market and Grupo Traxion was up by 9.8% on the back of stronger than expected 2Q23 results.

During the month of July, Umeme's share price was down by 9.1%, fully reflecting the stock going ex-dividend at the end of June, whilst Santos Brasil was down by 4.6%.

Purchases for the month of July amounted to £1.1m and realisations totalled £5.7m.

DEBT

UEM's bank debt marginally decreased from £21.3m to £21.2m and was drawn as USD 10.0m, GBP 7.5m and EUR 7.0m.

OTHER

UEM's share price ended July at 230.00p, up 2.7%. The discount to NAV marginally widened to 14.4% from 14.0%. UEM bought back 912,460 shares at an average price of 223.65p in the month.

Name of contact and telephone number for enquiries:

ICM Investment Management Limited +44(0)1372 271486

Charles Jillings / Alastair Moreton

Montfort Communications

Gay Collins, Pippa Bailey +44(0)20 3770 7913

utilico@montfort.london