BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided its latest portfolio update.
All information is at 30 April 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 | 5.4 | 6.7 | 14.0 | 11.4 | 14.0 | 104.0 |
| Net asset value | 5.2 | 7.1 | 23.4 | 26.7 | 33.2 | 130.8 |
| Benchmark (NR)** | 3.6 | 11.6 | 26.4 | 15.9 | 40.3 | 96.6 |
| MSCI Frontiers Index (NR) | 2.0 | -0.8 | 9.8 | 24.5 | 32.4 | 86.8 |
| MSCI Emerging Markets Index (NR) | -1.0 | -4.3 | -9.9 | 11.0 | 27.3 | 57.3 |
| US Dollars: | ||||||
| Share price | 0.6 | -0.2 | 3.3 | 7.2 | 10.7 | 65.0 |
| Net asset value | 0.4 | 0.3 | 11.9 | 22.0 | 29.4 | 86.4 |
| Benchmark (NR)** | -1.2 | 4.4 | 14.6 | 11.6 | 36.2 | 59.6 |
| MSCI Frontiers Index (NR) | -2.7 | -7.1 | -0.4 | 19.9 | 28.5 | 50.4 |
| MSCI Emerging Markets Index (NR) | -5.6 | -10.5 | -18.3 | 6.9 | 23.5 | 26.7 |
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: | 186.41c |
| Net asset value – cum income: | 189.32c |
| Sterling: | |
| Net asset value – capital only: | 148.48p |
| Net asset value – cum income: | 150.79p |
| Share price: | 135.50p |
| Total assets (including income): | £285.5m |
| Discount to cum-income NAV: | 10.1% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 3.1% |
| 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 3.1% and includes the 2021 interim dividend of 2.75 cents per share, announced on 01 June 2021 and paid to shareholders on 25 June 2021. Also included is the 2021 final dividend of 4.25 cents per share, declared on 1 December 2021, and paid to shareholders on 11 February 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 | 34.9 | Saudi Arabia | 22.3 | ||
| Industrials | 16.5 | Indonesia | 14.3 | ||
| Consumer Discretionary | 15.0 | United Arab Emirates | 10.7 | ||
| Materials | 14.0 | Vietnam | 8.8 | ||
| Energy | 8.9 | Greece | 6.9 | ||
| Consumer Staples | 6.5 | Thailand | 6.8 | ||
| Real Estate | 6.1 | Malaysia | 5.4 | ||
| Information Technology | 2.9 | Kazakhstan | 5.3 | ||
| Utilities | 2.7 | Qatar | 4.7 | ||
| Health Care | 1.7 | Hungary | 4.6 | ||
| Communication Services | 1.4 | Philippines | 4.4 | ||
| —– | Egypt | 3.4 | |||
| 110.6 | Romania | 2.6 | |||
| —– | Chile | 2.4 | |||
| Short positions | -1.8 | Panama | 1.8 | ||
| ===== | Kenya | 1.5 | |||
| Poland | 1.4 | ||||
| Colombia | 1.3 | ||||
| Pakistan | 0.8 | ||||
| Peru | 0.5 | ||||
| Ukraine | 0.4 | ||||
| Nigeria | 0.3 | ||||
| —– | |||||
| Total | 110.6 | ||||
| —– | |||||
| Short positions | -1.8 | ||||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 31.05 2021 % | 30.06 2021 % | 31.07 2021 % | 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 % | |
| Long | 105.3 | 106.8 | 107.1 | 104.2 | 108.1 | 110.6 | 106.3 | 104.3 | 108.4 | 110.7 | 111.1 | 110.6 |
| Short | 2.3 | 4.6 | 2.3 | 0.6 | 0.4 | 0.4 | 0.4 | 1.0 | 1.9 | 3.3 | 2.3 | 1.8 |
| Gross | 107.6 | 111.4 | 109.4 | 104.8 | 108.5 | 111.0 | 106.7 | 105.3 | 110.3 | 114.0 | 113.4 | 112.4 |
| Net | 103.0 | 102.2 | 104.8 | 103.6 | 107.7 | 110.2 | 105.9 | 103.3 | 106.5 | 107.4 | 108.8 | 108.8 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Saudi National Bank | Saudi Arabia | 5.4 |
| Emaar Properties | United Arab Emirates | 4.8 |
| Bank Rakyat | Indonesia | 3.9 |
| Saudi British Bank | Saudi Arabia | 3.6 |
| Astra International | Indonesia | 3.2 |
| Mobile World | Vietnam | 3.0 |
| FPT | Vietnam | 2.9 |
| United International Transport | Saudi Arabia | 2.9 |
| Yanbu National Petrochemical | Saudi Arabia | 2.8 |
| National Bank of Greece | Greece | 2.6 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned +0.4% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which fell by 1.2% in April. For reference, the MSCI Emerging Markets Index ended the month down 5.6% and the MSCI Frontier Markets Index returned -2.7% over the same period (all performance figures are on a US Dollar basis with net income reinvested).
The trend of divergence in performance between larger and smaller emerging markets continued in April. Over the past 12 months, the benchmark index has risen by +14.6% whilst the MSCI Emerging Markets index has fallen -18%. Frontier Markets have benefited from an acceleration of economic growth driven by reopening and attractive market valuations, whilst Emerging Markets have tumbled lower as markets priced in continued uncertainty from Russia-Ukraine dispute, an increasingly hawkish Fed, intensifying lockdowns in China, and dollar strength.
In our universe, country level performance was mixed. Kazakhstan bounced off its lows (+9.9%), Saudi Arabia (+5.9%) was another top performer, and Indonesia continued its rally this month, returning +3.7%. On the other side, Poland (-19%), Peru (-17%), and Chile (-12%) were challenged. Russia’s decision to cut off gas exports to Poland and Bulgaria was the key driver of performance in Eastern Europe. The risk of recession continues to loom large as we approach key deadlines for the EU and Russia to establish payment terms. In Latin America. In Chile, inflation is forcing the hand of the central bank to raise rates more steeply, with the most recent annual CPI print coming in at 9.4%.
The Company benefited from its exposure to the UAE, which has been buoyed by stronger commodity prices, economic recovery, and an influx of foreign capital as it rebrands itself from a transitory base to one that can be a permanent hub for expatriates. We’ve held positions in the UAE across a variety of sectors which all contributed positively. Air Arabia (+33%) was the biggest contributor driven by a rebound in tourism in the region. Emaar Properties (+9%) also did well driven by the booming property sector in UAE. We have seen a particularly strong recovery in the luxury segment volumes are ticking up, mortgages and residencies are being easier to obtain, and demand is resilient. Nitrogen fertilizer producer Fertiglobe (+3%) was another key contributor. The current high levels of European gas prices has pushed urea prices up around 150% over the past year, which coupled with the supply disruptions from Ukraine has benefited the company. Elsewhere, Indonesian auto conglomerate Astra International (+14%) did on coal price tightness continues and beta to domestic recovery. Kazakh super-app Kaspi (+30%) recovered after a sentiment-driven drawdown month in March despite strong earnings results.
On the other side, stock picks in Saudi Arabia detracted. Gym operator Leejam Sports (-12%) is seeing pressure on subscriber growth and pricing. National Medical Care (-7%) also detracted. In Egypt, our position in tobacco product name Eastern Company (-11%) hurt returns.
We made a few changes to the portfolio in April. We shifted our exposure in Thailand, exiting Kasikorn Bank as we look to reduce exposure to domestic Thailand in light of an expected inflation uptick and pressure on the central bank to raise rates against an already weak consumption backdrop. We also exited convenience store operator CP ALL on the same view and because we do not expect a full resumption of tourism this year as China holds onto to a strict zero COVID stance. We bought petrochemical name PTT Global to express a view on elevated refining spreads and compelling dividend yield. In Malaysia, we rotated out of Genting Berhad into Genting Malaysia as the latter has shown more capital discipline and a stronger balance sheet. We continue to expect a tourism and travel recovery (ex China) and as such, have upped positions in both Wizz Air and Copa Airlines. We also bought uranium producer Kazatamprom, the stock price has lagged the rally in uranium prices. We took profits across several names such as AKR Corpindo, Air Arabia, Fertiglobe, and Kaspi.
Overall, we are excited by the prospects of our portfolio. In an environment of high inflation, rising rates, and pressure on global Central Banks, frontier markets stack up favourably, and we would highlight the GCC where Current account and fiscal surpluses are on track to be the highest seen for 8 years. Valuations in fronter markets remain attractive relative to their own history and also relative to more developed markets. We believe our opportunity set is a compelling universe to generate alpha.
Sources:
1BlackRock as at 30 April 2022
2MSCI as at 30 April 2022
25 May 2022
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
