Utilico Emerging Markets Regulatory News (UEM)

11 December 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 by 3.0% in November, slightly behind the MSCI EM total return Index ("MSCI") which was up 4.0% in Sterling terms in the month. In the eleven months to 30 November 2023, UEM's NAV total return has increased by 9.2%, significantly outperforming the MSCI which was up 1.3% in Sterling terms over that period.

Global stock markets rallied in November, as the downward trend in inflation lead to optimism that interest rates have peaked and the US Federal Reserve will soon start cutting rates. This resulted in the yield on 10-year US Treasury bonds falling sharply, the S&P 500 Index climbed 8.9%, and the DXY Dollar Index fell.

This risk-on environment was positive for emerging markets. In Brazil, the Bovespa Index soared by 12.5% with the central bank cutting its interest rate by 50bps, a third cut in a row. At 12.25%, the benchmark rate is well in excess of inflation which is now below 5%, and expectations are that further cuts will be enacted in the coming months. Markets elsewhere in Latam were similarly buoyant, with Mexico's Bolsa up 10.2% and Chile's IPSA rising 7.6%. Argentina's Merval Index rocketed 40.4% following the election of far-right outsider Javier Milei as its new President.

In Asia, there was decent performance in Vietnam's Ho Chi Minh Index, up 6.4%, and recovering some of the ground lost in October. India reported remarkably robust GDP growth at 7.6% in the July-September quarter, and the Sensex Index appreciated by 4.9%. Elsewhere, the Philippines PSEi Index was up 4.2% and the Indonesia JCI firmed by 4.9%.

A notable exception to the broad market strength was China, where the Hang Seng Index declined by 0.4% and the Shanghai Composite had a 0.4% gain. This reflects continued outflows by foreign investors and lingering concerns over consumer confidence, the property market, and local government debt levels. It was notable that the country reported its first-ever quarterly deficit in foreign direct investment since records began in 1998.

In the currency markets, Sterling strengthened against most currencies, up 4.3% against the US Dollar and 1.1% versus the Euro. It was also up 2.0% versus the Brazilian Real, 1.7% versus the Chinese Renminbi, 4.5% against the Indian Rupee and 2.0% versus the Philippine Peso.

PORTFOLIO

There were two changes to the top thirty holdings, with Bolsa Valores de Colombia ("BVC") and Engie Brasil Energia replacing China Datang Renewables and Pertamina Geothermal on relative performance. BVC shares soared by 32.4% in November following the conclusion of the merger of the Chile, Peru and Colombia exchanges into a single entity, Nuam. This long-awaited process sees BVC shareholders gain a 40% stake in what is expected to be a more liquid entity, with the consolidation likely to bring about significant synergies.

Many of the portfolio investment companies reported encouraging Q3 results during the month and combined with the strong tailwinds of the broader markets, resulted in some superb share price performances. In Brasil, Omega Energia (being rebranded to Serena Energia) reported Q3 energy production up 31.0% and EBITDA growth of 52.0%, and its share price climbed by 25.9%. Sabesp's privatisation process continues to advance, and the share price appreciated by 15.8%. Recently-privatised Eletrobras demonstrated its turnaround is accelerating, with Q3 EBITDA more than doubling and its share price increasing by 16.6%. Ocean Wilsons' share price was up 14.9% on the announcement that it has hired a financial advisor to evaluate a strategic review. Santos and Engie Brasil's share prices were also up 15.2% and 10.5% respectively over the month. 

Elsewhere, there were strong share price performances in the CEE region, with Inpost up 16.2% as it reported that its UK operations had turned profitable earlier than expected, helping Q3 EBITDA to grow by 36.6%. TTS reported volume growth of 32.9% helped by the recent Decirom acquisition, boosting EBITDA by 22.8% in Q3 and its share price increasing by 11.6% in November. Other notable movements were seen with Kunlun, up 11.1%, and FPT which recovered by 10.9% after last month's weakness.

Post-month end, the valuation of Petalite was reduced by 20.0% reflecting continued declines in listed EV peer share prices and the challenging market environment for capital raises of early-stage companies.

Portfolio purchases amounted to £6.5m and realisations totalled £5.6m in the month under review.

DEBT

UEM's debt increased from £21.4m to £25.6m during the month, drawn as GBP 7.5m and EUR 21.0m.

OTHER

UEM's share price ended November at 220.00p, up 5.3% over the month. The discount to NAV pleasingly narrowed to 13.6% from 16.2%. UEM bought back 1.2m shares at an average price of 218.33p in the month. This takes the total shares bought back in the eight months to 30 November 2023 to 6.7m, equivalent to 3.3% of the share capital as at 31 March 2023. 

The second quarterly interim dividend of 2.15p per ordinary share in respect of the year ending 31 March 2024, was declared in November and will be paid on 15 December 2023 to shareholders on the register on 1 December 2023.

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