BlackRock BRFI see better fundamentals in frontier and smaller emerging markets

BlackRock Frontiers Investment Trust (LON:BRFI)
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BlackRock Frontiers Investment Trust plc (LON:BRFI) has announced its portfolio update.

All information is at 31 December 2023 and unaudited.

You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi

Performance at month end with net income reinvested.

One
 month
%
Three
months
%
One
 year
%
Three
 years
%
Five
 years
%
Since 
Launch*
%
Sterling:
Share price2.1-0.715.733.430.7128.6
Net asset value4.31.415.946.148.0158.2
Benchmark (NR)**3.71.40.421.113.682.7
MSCI Frontiers Index (NR)2.3-0.55.35.617.768.8
MSCI Emerging Markets Index (NR)3.23.33.6-8.319.754.8
US Dollars:
Share price2.93.722.824.531.087.9
Net asset value5.15.923.036.448.3111.9
Benchmark (NR)**4.56.06.412.913.750.6
MSCI Frontiers Index (NR)3.04.011.6-1.617.838.0
MSCI Emerging Markets Index (NR)3.97.99.8-14.519.825.6

Sources: BlackRock and Standard & Poor’s Micropal

* 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
US Dollar
Net asset value – capital only:197.52c
Net asset value – cum income:203.47c
Sterling:
Net asset value – capital only:154.94p
Net asset value – cum income:159.60p
Share price:143.00p
Total assets (including income):£302.2m
Discount to cum-income NAV:10.4%
Gearing:Nil
Gearing range (as a % of gross assets):0-20%
Net yield*:4.4%
Ordinary shares in issue**:189,325,748
Ongoing charges***:1.38%
Ongoing charges plus taxation and performance fee****:3.78%

*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 4.4% and includes the 2023 interim dividend of 3.10 cents per share, declared on 6 June 2023, and paid to shareholders on 7 July 2023 and the 2023 final dividend of 4.90 cents per share, declared on 30 November 2023, and payable to shareholders on 14 February 2024.

** Excluding 52,497,053 ordinary shares held in treasury.

***The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding performance fees, finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for Year ended 30 September 2023.

**** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses and including performance fees but excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for Year ended 30 September 2023.

Sector
Analysis
Gross market value as a % of net assetsCountry
Analysis
Gross market value as a % of net assets
Financials41.0Saudi Arabia15.2
Energy14.1Indonesia13.8
Industrials12.6United Arab Emirates8.6
Materials11.8Philippines7.5
Consumer Staples9.7Hungary7.1
Consumer Discretionary8.5Thailand6.7
Real Estate6.6Kazakhstan6.6
Communication Services6.3Poland5.9
Information Technology5.6Vietnam5.6
Health Care0.4Chile5.3
—–Colombia4.1
116.6Qatar3.8
—–Malaysia3.3
Short positions-4.7Greece3.1
=====Multi-International2.8
Turkey2.8
Czech Republic2.5
Georgia2.1
Argentina1.9
Peru1.8
Romania1.4
KuwaitUkraineOmanCambodiaKenyaBangladeshTotal1.11.01.00.80.40.4116.6
—–
Short positions-4.7
=====

*reflects gross market exposure from contracts for difference (CFDs).

Market Exposure
 

31.01 2023    %28.02 2023    %31.03 2023    %30.04 2023    %31.05 2023    %30.06 2023    %31.07 2023    %31.08 2023    %30.09 2023    %31.10 2023    %30.11 2023    %31.12 2023    %
Long112.4111.9106.3108.5112.9116.9113.0113.3114.9118.8113.1116.6
Short5.13.93.93.83.64.03.03.03.03.14.64.7
Gross117.5115.8110.2112.3116.5120.9116.0116.3117.9121.9118.0121.3
Net107.3108.0102.4104.7109.3112.9110.0110.3111.9115.7108.8111.9

Ten Largest Investments

CompanyCountry of RiskGross market value as a % of net assets
Saudi National BankSaudi Arabia4.7
Bank Central AsiaIndonesia4.2
Emaar PropertiesUnited Arab Emirates3.4
Ayala LandPhilippines3.2
Epam SystemsMulti-International2.8
Wizz Air HoldingsHungary2.8
FPTVietnam2.8
Eldorado GoldTurkey2.8
Advanced Info ServiceThailand2.7
CP AllThailand2.7

Commenting on the markets, Sam Vecht, Emily Fletcher and Sudaif Niaz, representing the Investment Manager noted: 

The Company’s NAV rose by 5.1% in December, outperforming its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”) which returned 4.5%. For reference, the MSCI Emerging Markets Index was up 3.9% while the MSCI Frontier Markets Index was up 3.0% over the same period. All performance figures are on a US Dollar basis with net income reinvested.

December was another strong month for many of our markets. Latin America was the best performing region, with Peru (+24.5%) and Colombia (+13.5%) performing best while Poland (+8.2%) led in EMEA. Market reaction was upbeat to the return of Donald Tusk as PM since a pro-EU coalition government under Tusk (a former president of the European Council) is expected to unblock EU funding earmarked for Poland. Qatar and Saudi Arabia were other notable outperformers in the region. In Asia, Thailand was the best performing market, up by 5.9%.

Several stock picks did well in December. Hungarian low-cost carrier Wizz Air (+18.2%) was the top performing stock for a second consecutive month, rebounding from previous lows. IT services company EPAM (+15.2%) also continued its strong run. Portfolio performance was further supported by our positioning in Latin America through our holding in Chilean natural resources company SQM (+20.6%) and Colombian bank Bancolombia (+13.9%). The former performed well in anticipation of and the announcement of the partnership with Codelco, which has extended their lease in the Atacama until 2060. On the other hand, the Kazakh payments and e-commerce company Kaspi (-9.8%) pulled back some of its gains after reaching an all-time high at the end of November.

Over the course of December, we made few changes to the portfolio. We initiated a position in Polish clothing manufacturer LPP as we are optimistic about the company’s ability to expand in Southern Europe and based on our view that declining rates will be supportive for consumption. We also topped up our holding in Hungarian oil and gas company MOL, a high yielding stock. We trimmed our positions in polish bank PKO and National Bank of Greece, on the back of strong performance. We exited our holding in Philippines based conglomerate LT Group, as we see downside risk to the company’s tobacco business volumes.

We believe global markets are starting to feel the impact of higher interest rates, noting slowing credit growth in particular as evidence that a demand slowdown is imminent in developed markets. When combined with a Chinese economy which is struggling to find its footing we find it difficult to see where a meaningful pick up in global growth will come from. In contrast we see better fundamentals in frontier and smaller emerging markets. Monetary tightening across much of our universe was ahead of that in developed markets, particularly in Latin America and Eastern Europe. With inflation falling across many countries within our universe, rate cuts have started to materialize. This is a good set up for domestically oriented economies to see a cyclical pick up. Our investment universe, in absolute and relative terms, remains under-researched and we believe this should enable compelling alpha opportunities.

Sources:

1BlackRock as at 31 December 2023

2MSCI as at 31 December 2023

You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi

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Discover BlackRock Frontiers Investment Trust's portfolio investments as of 31 December 2023 in this disclosure. Learn more at blackrock.com/uk/brfi.
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BlackRock Frontiers Investment Trust plc provides its portfolio update as of 31 December 2023. Check out the performance and key investments of the trust.

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