BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided the following portfolio update.
All information is at 30 June 2020 and unaudited.
Performance at month end with net income reinvested.
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
| One month % | Three months % | One year % | Three years % | Five years % | Since Launch* % | |
| Sterling: | ||||||
| Share price | 7.7 | 18.4 | -26.2 | -26.2 | 9.1 | 35.7 |
| Net asset value | 4.6 | 21.2 | -23.9 | -20.6 | 10.4 | 45.1 |
| Benchmark (NR)** | 3.2 | 17.3 | -18.3 | -1.9 | 24.4 | 43.6 |
| MSCI Frontiers Index (NR) | 1.7 | 15.1 | -8.5 | -0.4 | 26.4 | 46.9 |
| MSCI Emerging Markets Index (NR) | 7.4 | 18.5 | -0.5 | 11.2 | 46.6 | 42.4 |
| US Dollars: | ||||||
| Share price | 7.7 | 18.0 | -28.3 | -29.7 | -14.2 | 8.0 |
| Net asset value | 4.5 | 20.7 | -26.1 | -24.3 | -13.1 | 15.3 |
| Benchmark (NR)** | 3.1 | 16.9 | -20.7 | -6.7 | -2.2 | 14.7 |
| MSCI Frontiers Index (NR) | 1.7 | 14.7 | -11.2 | -5.2 | -0.7 | 16.4 |
| MSCI Emerging Markets Index (NR) | 7.4 | 18.1 | -3.4 | 5.8 | 15.1 | 12.8 |
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: | 123.96c |
| Net asset value – cum income: | 124.78c |
| Sterling: | |
| Net asset value – capital only: | 100.32p |
| Net asset value – cum income: | 100.99p |
| Share price: | 96.30p |
| Total assets (including income): | £244.2m |
| Discount to cum-income NAV: | 4.6% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 6.0% |
| Ordinary shares in issue: | 241,822,801 |
| Ongoing charges**: | 1.4% |
| Ongoing charges plus taxation and performance fee: | 1.4% |
*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 6.0% and includes the 2019 final dividend of 4.75 cents per share declared on 06 December 2019 with a pay date of 07 February 2020. Also included is the 2020 interim dividend of 2.75 cents per share announced on 28 May 2020 and due to be paid to shareholders on 26 June 2020.
**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2019.
| Sector Analysis | Gross market value as a % of net assets* | Country Analysis | Gross market value as a % of net assets* | ||
| Financials | 28.8 | Indonesia | 12.8 | ||
| Consumer Discretionary | 16.7 | Saudi Arabia | 11.0 | ||
| Industrials | 14.5 | Philippines | 10.0 | ||
| Consumer Staples | 11.9 | Vietnam | 8.9 | ||
| Energy | 9.1 | Thailand | 8.8 | ||
| Real Estate | 7.2 | Egypt | 8.2 | ||
| Communication Services | 6.2 | Kazakhstan | 6.1 | ||
| Materials | 5.9 | Chile | 5.4 | ||
| Utilities | 4.8 | Malaysia | 4.7 | ||
| Health Care | 2.6 | Pakistan | 3.9 | ||
| Information Technology | 2.1 | Greece | 3.7 | ||
| —– | Qatar | 3.7 | |||
| 109.8 | Romania | 3.7 | |||
| —– | United Arab Emirates | 3.5 | |||
| Short positions | -1.5 | Poland | 3.0 | ||
| ===== | Czech Republic | 2.0 | |||
| Peru | 1.9 | ||||
| PAN-Africa | 1.8 | ||||
| Pan-Emerging Europe | 1.8 | ||||
| Ukraine | 1.7 | ||||
| Hungary | 1.6 | ||||
| Kenya | 1.3 | ||||
| Nigeria | 0.3 | ||||
| —– | |||||
| Total | 109.8 | ||||
| —– | |||||
| Short positions | -1.5 | ||||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 31.07 2019 % | 31.08 2019 % | 30.09 2019 % | 31.10 2019 % | 30.11 2019 % | 31.12 2019 % | 31.01 2020 % | 29.02 2020 % | 31.03 2020 % | 30.04 2020 % | 31.05 2020 % | 30.06 2020 % | |
| Long | 117.0 | 111.5 | 110.1 | 108.0 | 107.8 | 108.0 | 113.0 | 107.1 | 106.4 | 105.9 | 109.6 | 109.8 |
| Short | 5.1 | 4.2 | 4.1 | 2.2 | 1.7 | 1.0 | 1.1 | 3.8 | 2.5 | 2.6 | 2.5 | 1.5 |
| Gross | 122.1 | 115.7 | 114.2 | 110.2 | 109.5 | 109.0 | 114.1 | 110.9 | 108.9 | 108.5 | 112.1 | 111.3 |
| Net | 111.9 | 107.3 | 106.0 | 105.8 | 106.1 | 107.0 | 111.9 | 103.3 | 103.9 | 103.3 | 107.1 | 108.3 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| PTT Exploration & Production Public | Thailand | 3.9 |
| Bank Mandiri | Indonesia | 3.6 |
| Astra International | Indonesia | 3.3 |
| United International Transport | Saudi Arabia | 3.1 |
| Halyk Savings Bank | Kazakhstan | 2.9 |
| Eastern Tobacco | Egypt | 2.8 |
| Mitra Adiperkasa | Indonesia | 2.8 |
| MCB Bank | Pakistan | 2.7 |
| LT Group | Philippines | 2.6 |
| Vincom Retail | Vietnam | 2.5 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned +4.5% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which returned +3.1% in June. For reference, the MSCI Emerging Markets Index returned +7.4% and the MSCI Frontier Markets Index returned +1.7% over the same period (all performance figures are on a US Dollar basis with net income reinvested).Our universe of smaller emerging and frontier markets continued their rebound in June, having been a laggard to Developed Markets (DM) in the rally, have to date outperformed DM by 2.6%. Supportive of global equities was optimism around peaking COVID-19 cases – particularly in Europe – and signs that the world was past “peak lockdown” and that from here on economies would gradually reopen and economic activity would normalise. The bearish predictions of the rapid spread of COVID-19 emerged. However, fatality rates in the emerging and frontiers markets have not been broadly borne out.
The biggest contributors to performance in June were our positions in the Philippines, driven by our holdings across industrials, consumer and financials stocks: International Container Terminals (+18.7%), Bloomberry Resorts (+21.7%) and Bank of the Philippines (+11.4%). Stock selection in Saudi Arabia contributed positively: our holding in Saudi Arabia car rental company, United International Transport (+13.4%) was a strong performer, whilst the majority of the market (which we are underweight) lagged the recovery. Our Indonesian positions continued to contribute to performance as their strong rebound extended into June, driven by our cyclical holdings in retailer Mitra Adiperkasa (+10.0%) and real estate developer Pakuwon Jati (+17.5%)
The largest detractor in June was our position in Vietnam, as the market gave back some of its strong gains in April and May. The biggest stock contributors in Vietnam were mall operator, Vincom Retail (-9.6%), followed by retailer, Mobile World (-4.2%). Our holding in Polish apparel retailer, LPP (-11.2%), was an additional detractor as store closures and weak near-term sales continued. Thai based consumer finance company, Aeon Thana (-21.5%), detracted amid concerns of further non-performing loan (NPL) formation and the need for provisioning.
In terms of recent portfolio changes, we have been taking profits in positions that have worked well in Indonesia and Philippines, while maintaining conviction in our overweight positions in these markets. We have also continued to add capital in Eastern Europe. Generally, these markets are very cheap and almost entirely forgotten. We believe that the European Recovery Fund, as currently envisaged would be a meaningful positive for these economies, directing a very substantial infrastructure spend into the region. Elsewhere, we have cut exposure to Dubai as we believe the anticipated pick up in tourism remains delayed. We have reduced some pulp exposure in Chile where we have concerns that COVID-19 could have accelerated structural decline in the print business.
While smaller emerging and frontier markets are vulnerable to health and economic fall-out from COVID-19, data thus far on infection rate and fatalities gives some hope that the damage to life and the economy will not be as pervasive as originally feared. We remain positive on the prospects of select economies, where policy makers have taken upfront, prudent measures to contain COVID-19, where the foreign exchange debt situation is relatively manageable, that will benefit from lower oil prices and whose currencies are not over-valued. More broadly, many of our markets continue to look very compelling at current valuation, trading at sub 9x trailing price-to-earnings and in some cases close to global financial crisis levels. Despite the bounce, the portfolio is still around the lowest valuation levels that we have seen in the past 10 years.
Sources:
1BlackRock as at 30 June 2020
2MSCI as at 30 June 2020
24 July 2020
Discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
