BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided its latest portfolio update.
All information is at 31 July 2022 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 price | 4.2 | -6.2 | 11.8 | -0.9 | 6.6 | 91.4 |
| Net asset value | 3.8 | -6.4 | 14.7 | 8.4 | 18.4 | 116.1 |
| Benchmark (NR)** | 3.2 | -7.1 | 18.6 | 0.4 | 24.0 | 82.7 |
| MSCI Frontiers Index (NR) | 1.0 | -7.4 | -4.1 | 1.1 | 16.6 | 72.9 |
| MSCI Emerging Markets Index (NR) | -0.4 | -3.5 | -8.7 | 3.4 | 13.6 | 51.8 |
| US Dollars: | ||||||
| Share price | 4.4 | -9.1 | -2.2 | -1.6 | -1.5 | 50.0 |
| Net asset value | 4.1 | -9.3 | 0.4 | 7.7 | 9.4 | 69.1 |
| Benchmark (NR)** | 3.4 | -10.0 | 3.8 | -0.2 | 14.4 | 43.7 |
| MSCI Frontiers Index (NR) | 1.2 | -10.3 | -16.0 | 0.4 | 7.6 | 35.0 |
| MSCI Emerging Markets Index (NR) | -0.2 | -6.5 | -20.1 | 2.7 | 4.9 | 18.5 |
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: | 166.48c |
| Net asset value – cum income: | 169.12c |
| Sterling: | |
| Net asset value – capital only: | 136.81p |
| Net asset value – cum income: | 138.98p |
| Share price: | 125.00p |
| Total assets (including income): | £263.1m |
| Discount to cum-income NAV: | 10.1% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 4.3% |
| Ordinary shares in issue**: | 189,325,748 |
| Ongoing charges***: | 1.4% |
| Ongoing charges plus taxation and performance fee: | 2.4% |
*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 4.3% and includes the 2021 final dividend of 4.25 cents per share, declared on 1 December 2021, and paid to shareholders on 11 February 2022. Also included is the 2022 interim dividend of 2.75 cents per share, declared on 26 May 2022, and paid to shareholders on 24 June 2022.
** Excluding 52,497,053 ordinary shares held in treasury.
***Calculated as a percentage of average net assets and using expenses, excluding Performance fees and interest costs for the year ended 30 September 2021.
| Sector Analysis | Gross market value as a % of net assets | Country Analysis | Gross market value as a % of net assets | |
| Financials | 38.1 | Saudi Arabia | 25.1 | |
| Materials | 13.3 | Indonesia | 11.1 | |
| Industrials | 12.0 | United Arab Emirates | 10.1 | |
| Consumer Discretionary | 11.1 | Malaysia | 8.7 | |
| Energy | 9.8 | Vietnam | 6.9 | |
| Consumer Staples | 7.7 | Kazakhstan | 6.7 | |
| Real Estate | 4.7 | Chile | 5.6 | |
| Information Technology | 3.8 | Thailand | 5.1 | |
| Utilities | 3.4 | Greece | 4.7 | |
| Communication Services | 1.9 | Hungary | 4.6 | |
| Health Care | 1.5 | Qatar | 4.4 | |
| —– | Romania | 2.5 | ||
| 107.3 | Egypt | 2.2 | ||
| —– | Philippines | 1.9 | ||
| Short positions | -6.2 | Poland | 1.9 | |
| ===== | Panama | 1.8 | ||
| Colombia | 1.6 | |||
| Kenya | 1.5 | |||
| Peru | 0.5 | |||
| Ukraine | 0.4 | |||
| —– | ||||
| Total | 107.3 | |||
| —– | ||||
| Short positions | -6.2 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 31.08 2021 % | 30.09 2021 % | 31.10 2021 % | 30.11 2021 % | 31.12 2021 % | 31.01 2022 % | 28.02 2022 % | 31.03 2022 % | 30.04 2022 % | 31.05 2022 % | 30.06 2022 % | 31.07 2022 % | |
| Long | 104.2 | 108.1 | 110.6 | 106.3 | 104.3 | 108.4 | 110.7 | 111.1 | 110.6 | 107.9 | 106.1 | 107.3 |
| Short | 0.6 | 0.4 | 0.4 | 0.4 | 1.0 | 1.9 | 3.3 | 2.3 | 1.8 | 4.7 | 4.6 | 6.2 |
| Gross | 104.8 | 108.5 | 111.0 | 106.7 | 105.3 | 110.3 | 114.0 | 113.4 | 112.4 | 112.6 | 110.7 | 113.5 |
| Net | 103.6 | 107.7 | 110.2 | 105.9 | 103.3 | 106.5 | 107.4 | 108.8 | 108.8 | 103.2 | 101.5 | 101.1 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Saudi National Bank | Saudi Arabia | 4.9 |
| Emaar Properties | United Arab Emirates | 4.7 |
| Saudi British Bank | Saudi Arabia | 3.8 |
| Bank Rakyat | Indonesia | 3.8 |
| Genting Malaysia | Malaysia | 3.0 |
| Qatar Gas Transport | Qatar | 3.0 |
| Leejam Sports | Saudi Arabia | 2.9 |
| Abdullah Al Othaim Markets | Saudi Arabia | 2.9 |
| JSC Kaspi | Kazakhstan | 2.7 |
| FPT | Vietnam | 2.6 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned 4.1% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which rose by 3.4% in July. For reference, the MSCI Emerging Markets Index ended the month down 0.2% and the MSCI Frontier Markets Index returned 1.2% over the same period (all performance figures are on a US Dollar basis with net income reinvested).
Inflation remains front and center as the Federal Reserve (‘Fed’) delivered its second consecutive 75bp rate hike, and the European Central Bank (‘ECB’) delivered its first rate increase in 11 years. As we have previously noted, inflation in many frontier and emerging markets remains more muted than in the developed world. Equally interesting is central bank approach to inflation. Central banks in both Latin America and Eastern Europe have adopted an orthodox approach to policy rates. Chile stands out with a policy rate of 9.75%, given from 1996 to now there are only three other months where this policy rate was exceeded. Similarly, rates in Hungry are the highest they have been since 2003 and in Colombia, since 2008.
Kenya (+16%) was the top performing country this month. Kazakhstan was also strong this month (+14%) driven largely by stock specifics, followed by Chile (+12%). Middle Eastern countries also finished the month in the green as any hopes of OPEC+ boosting supply waned and buoyed oil prices higher – Saudi Arabia and Qatar both up by 6%. Thailand (-2%) also fell, largely driven by current account deterioration and currency weakness.
The Company benefited from its exposure to Kazakhstan and the Middle East. At the stock level, uranium producer Kazatamprom (+23%) was up on strong operating results, reporting an increase in long-term contract pricing and encouraging guidance. Leejam Sports (+23%), gym operator in Saudi Arabia also rose over expectations of a rebound in number of subscribers. Frontken Malaysia (+25%), which provides equipment cleaning services to semi-conductor foundries, was another strong contributor after delivering strong quarterly results. On the other side. Vietnamese electronics retailer Mobile World (-15%) hurt performance as the reopening of the economy slows down sales of traditional WFH winners. IT Services Provider, FPT (-3%) in Vietnam, gave back gains after a strong June.
We made a few changes to the portfolio in July. We have started to move some money towards carry countries (which borrow from international markets to fund growth). These are particularly compelling where the currency looks attractive, and rates are close to or have already peaked. We initiated a position in Banco Santander Chile for exactly this setup – we believe rate hikes are approaching a peak and inflation should slowdown in the medium term. Similarly, we added to our position in Polish bank PKO. We continued trimming exposure to Indonesia post strong performance concerned that inflation is starting to tick up while policy rates have not caught up.
While we remain cautious on markets in near-term from recession concerns, we are optimistic over the long-term as our under-researched investment universe should allow for compelling alpha opportunities.
Sources:
1BlackRock as at 31 July 2022
2MSCI as at 31 July 2022
15 August 2022
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
