BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided the following portfolio update.
All information is at 31 August 2020 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 | 4.1 | 5.3 | -25.5 | -31.2 | 13.2 | 32.6 |
| Net asset value | 3.6 | 4.1 | -21.8 | -24.4 | 15.2 | 44.4 |
| Benchmark (NR)** | -0.4 | -1.3 | -20.7 | -12.1 | 27.2 | 37.3 |
| MSCI Frontiers Index (NR) | 6.1 | 0.9 | -13.9 | -7.4 | 34.0 | 45.7 |
| MSCI Emerging Markets Index (NR) | 0.2 | 10.4 | 4.1 | 4.7 | 74.0 | 46.3 |
| US Dollars: | ||||||
| Share price | 5.7 | 13.5 | -18.5 | -28.7 | -1.7 | 13.9 |
| Net asset value | 5.3 | 12.3 | -14.4 | -21.7 | 0.1 | 23.8 |
| Benchmark (NR)** | 1.6 | 6.9 | -12.8 | -8.7 | 10.7 | 18.9 |
| MSCI Frontiers Index (NR) | 8.2 | 9.3 | -5.3 | -3.8 | 16.7 | 25.2 |
| MSCI Emerging Markets Index (NR) | 2.2 | 19.5 | 14.5 | 8.7 | 51.4 | 25.6 |
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: | 131.97c |
| Net asset value – cum income: | 134.03c |
| Sterling: | |
| Net asset value – capital only: | 98.99p |
| Net asset value – cum income: | 100.53p |
| Share price: | 94.10p |
| Total assets (including income): | £242.9m |
| Discount to cum-income NAV: | 6.4% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 6.2% |
| Ordinary shares in issue**: | 241,612,728 |
| 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 6.2% 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 paid to shareholders on 26 June 2020.
** Excluding 210,073 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 2019.
| Sector Analysis | Gross market value as a % of net assets* | Country Analysis | Gross market value as a % of net assets* | ||
| Financials | 28.0 | Indonesia | 14.4 | ||
| Consumer Discretionary | 15.7 | Saudi Arabia | 12.7 | ||
| Industrials | 13.6 | Vietnam | 9.2 | ||
| Consumer Staples | 12.3 | Philippines | 8.8 | ||
| Materials | 11.7 | Thailand | 7.8 | ||
| Energy | 8.6 | Egypt | 7.3 | ||
| Utilities | 5.5 | Chile | 6.0 | ||
| Real Estate | 5.5 | Kazakhstan | 5.8 | ||
| Communication Services | 4.3 | Greece | 4.1 | ||
| Health Care | 2.7 | Pakistan | 4.0 | ||
| Information Technology | 2.3 | Malaysia | 4.0 | ||
| —– | Poland | 3.9 | |||
| 110.2 | Qatar | 3.9 | |||
| —– | Romania | 3.8 | |||
| Short positions | 0.0 | United Arab Emirates | 2.6 | ||
| ===== | Czech Republic | 2.0 | |||
| Pan-Emerging Europe | 1.8 | ||||
| PAN-Africa | 1.7 | ||||
| Peru | 1.7 | ||||
| Hungary | 1.7 | ||||
| Ukraine | 1.3 | ||||
| Kenya | 1.2 | ||||
| Nigeria | 0.3 | ||||
| Argentina | 0.2 | ||||
| —– | |||||
| Total | 110.2 | ||||
| —– | |||||
| Short positions | 0.0 | ||||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 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 % | 31.07 2020 % | 31.08 2020 % | |
| Long | 110.1 | 108.0 | 107.8 | 108.0 | 113.0 | 107.1 | 106.4 | 105.9 | 109.6 | 109.8 | 110.3 | 110.2 |
| Short | 4.1 | 2.2 | 1.7 | 1.0 | 1.1 | 3.8 | 2.5 | 2.6 | 2.5 | 1.5 | 1.1 | 0.0 |
| Gross | 114.2 | 110.2 | 109.5 | 109.0 | 114.1 | 110.9 | 108.9 | 108.5 | 112.1 | 111.3 | 111.4 | 110.2 |
| Net | 106.0 | 105.8 | 106.1 | 107.0 | 111.9 | 103.3 | 103.9 | 103.3 | 107.1 | 108.3 | 109.2 | 110.2 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Bank Mandiri | Indonesia | 3.7 |
| PTT Exploration & Production Public | Thailand | 3.5 |
| Astra International | Indonesia | 3.0 |
| MCB Bank | Pakistan | 2.7 |
| CP All PCL | Thailand | 2.7 |
| Eastern Tobacco | Egypt | 2.6 |
| Halyk Savings Bank | Kazakhstan | 2.6 |
| Mobile World | Vietnam | 2.5 |
| LT Group | Philippines | 2.5 |
| United International Transport | Saudi Arabia | 2.5 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned +5.3%1 versus the Company’s benchmark (the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”)), which returned +1.6% in August2. For reference, the MSCI Emerging Markets Index ended the month +2.2% and the MSCI Frontier Markets Index +8.2%2 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 to post good performance in August, particularly in the African and Middle Eastern markets. Despite a continual rise in COVID-19 cases, equities have continued to post gains with investor appetite underpinned by a falling dollar, an accommodative Federal Reserve, an economic recovery led by China and a further fall in U.S Treasury yields. A relatively better Q2 earnings seasons from low expectations was another support over the summer. Frontier equity markets did some catching up in August, led by markets outside of Asia. Many markets such as Egypt, Pakistan and Vietnam benefited from a build-up in foreign exchange reserves in excess of market expectations.
The biggest contributors to performance in August were our positions in Vietnam driven by holdings in consumer stocks through Mobile World (+25.3%), and Quang Ngai Sugar (+13.3%) as well as in Technology via FPT (+13.6%). Our positions in Eastern Europe were an additional contributor this month with stock selection in Poland, Romania and Hungary all positive contributors as the region benefited from sentiment surrounding the European Recovery Fund and increased fiscal support. Our holdings in Romanian financial Banca Transilvania (+15.4%) and Energy company Petrom (+17.0%) were both additive as was Eastern European airline Wizz Air (+23.3%).
The largest detractor in August was our position in Indonesia driven by holdings in auto conglomerate Astra International (-0.7%) and real estate developer Pakuwon Jati (-0.1%) pausing as an increase in COVID-19 cases pointed to renewed lockdown measures. Our holding in chicken producer MHP in Ukraine was another detractor (-13.5%) post results showing weak cash flow and a sizeable cut in the dividend. Chilean electric energy company Colbun also detracted (-14.5%) driven by a weaker earnings result than expected and the overhang of potential forced selling of the equity market by local pension funds also weighed on the stock.
We did not make too many changes to the portfolio in August. We further added to oil exposure in Saudi, continuing the rotation we started last month away from domestic exposure where we took profits. We remain underweight in financials. Elsewhere we trimmed some winners to take profits in Vietnam and Greece.
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 economy will not be as pervasive as originally feared. We are broadly positioned for a normalisation in global economic activity on a one-year basis, preferring cyclicals to growth stocks. We remain positive on prospects of select economies, where policy makers have taken upfront, prudent measures to contain COVID-19, where the FX debt situation is relatively manageable, that will benefit from lower oil price 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 last 10 years.
Sources:
1BlackRock as at 31 August 2020
2MSCI as at 31 August 2020
24 September 2020
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
