BlackRock Frontiers Investment Trust NAV returned 2.7% in August

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

All information is at 31 August 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 price7.45.412.415.46.6105.6
Net asset value7.46.214.725.721.5132.1
Benchmark (NR)**6.42.717.112.324.394.3
MSCI Frontiers Index (NR)6.55.7-1.38.817.084.1
MSCI Emerging Markets Index (NR)5.01.3-7.513.514.159.5
US Dollars:
Share price2.7-2.7-5.010.2-3.654.1
Net asset value2.7-1.9-3.120.19.973.7
Benchmark (NR)**1.7-5.2-1.07.212.246.1
MSCI Frontiers Index (NR)1.8-2.4-16.63.95.737.4
MSCI Emerging Markets Index (NR)0.4-6.5-21.88.43.019.0

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:170.41c
Net asset value – cum income:173.77c
Sterling:
Net asset value – capital only:146.45p
Net asset value – cum income:149.33p
Share price:134.25p
Total assets (including income):£282.7m
Discount to cum-income NAV:10.1%
Gearing:nil
Gearing range (as a % of gross assets):0-20%
Net yield*:4.0%
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 4.0% 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 assetsCountry
Analysis
Gross market value as a % of net assets
Financials38.1Saudi Arabia23.1
Materials13.7Indonesia11.7
Consumer Discretionary10.3United Arab Emirates9.0
Industrials9.8Malaysia8.4
Energy9.5Kazakhstan7.6
Consumer Staples8.0Vietnam7.0
Information Technology4.9Chile5.9
Real Estate4.6Thailand5.3
Communication Services4.5Greece4.7
Utilities2.3Qatar4.3
Health Care1.6Hungary4.3
—–Romania2.5
107.3Philippines2.0
—–Egypt1.9
Short positions-5.3Panama1.9
=====Poland1.6
Peru1.5
Kuwait1.5
Colombia1.5
Kenya1.2
Ukraine0.4
  —–
Total107.3
—–
Short positions-5.3
=====

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

Market Exposure 

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
  %
31.08
 2022
  %
Long108.1110.6106.3104.3108.4110.7111.1110.6107.9106.1107.3107.3
Short 0.4 0.4 0.4 1.0 1.9 3.3 2.3 1.8 4.7 4.6 6.2 5.3
Gross108.5111.0106.7105.3110.3114.0113.4112.4112.6110.7113.5112.6
Net107.7110.2105.9103.3106.5107.4108.8108.8103.2101.5101.1102.0

Ten Largest Investments

CompanyCountry of RiskGross market value as a % of net assets
Saudi National BankSaudi Arabia4.7
Emaar PropertiesUnited Arab Emirates4.6
Bank RakyatIndonesia4.2
JSC KaspiKazakhstan3.3
Abdullah Al Othaim MarketsSaudi Arabia3.1
Genting MalaysiaMalaysia3.0
Saudi TelecomSaudi Arabia3.0
Qatar Gas TransportQatar2.9
Saudi British BankSaudi Arabia2.8
FPTVietnam2.6

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

The Company’s NAV returned 2.7% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which rose by 1.7% in August. For reference, the MSCI Emerging Markets Index ended the month up 0.4% and the MSCI Frontier Markets Index returned 1.8% over the same period (all performance figures are on a US Dollar basis with net income reinvested).

Market sentiment in August was dominated by speculation around a Federal Reserve (‘Fed’) pivot at Jackson Hole which eventually culminated into a strong reiteration of their hawkish stance. Markets globally remained concerned about a global growth shock. Frontier markets have fared better as they did not show the same fiscal largesse as many developed economies and several central banks have been disciplined about raising rates.

Kazakhstan (+13%) was the top performing country this month, largely driven by stock specifics. The market has started to recover from the lows it experienced in the aftermath of the Russia and Ukraine conflict and concerns of contagion. Indonesia also had a good month (+5%) as the country continued to show strong economic recovery.  Indonesia has benefited from a very strong trade balance this year as exports have been supported by high coal and palm oil prices, which have supported the currency.  On the other side, eastern Europe has lagged. Poland (-13%) was the worst performer. The European energy crisis has driven a significant increase in Poland’s energy import bills, and created fears around the potential economic impact of a substantial European recession. Colombia (-6%) also finished August in the red on concerns of a strong shift to the left in government agenda post elections.

The Company benefited from its exposure to the United Arab Emirates. Emaar Properties (+14%) was the top contributor, rising on the back of the very strong demand trends for Dubai real estate that we have seen this year. Kazakh fintech platform Kaspi (+17%) also rallied on the announcement of strong results, abating market concerns on the disruption earlier in the year.  Saudi tech services company ELM (+17%) reported a strong earnings release, benefiting from an increase in government digitization spend. On the other side, Saudi gym operator Leejam Sports (-24%) was the top detractor as the company has struggled to grow membership as much as expected.

We made few changes to the portfolio in August. We added to our exposure in Indonesia after the central bank delivered an unexpected 25bps rate hike. We believe it sends the right signal to the market amidst an environment of rising inflation. We increased our holding in Peruvian bank Credicorp, where we think net interest margins can continue to improve. We initiated a position in Kuwaiti wireless telecom giant Mobile Telecommunication, a company where we think the strong free cash flow generation is insufficiently recognized. 

We reduced exposure to Saudi Arabia, a market that has shown very strong performance year to date, rising 11%.  We have also reduced our holding in Emaar Properties to book profits.

We see marked contrast in the monetary and fiscal policy decisions that have been taken in small emerging/frontier and developed markets during 2022 and find significant value in currencies and equity markets across many countries. We are optimistic over the long-term in our under-researched investment universe which should allow for compelling alpha opportunities.

Sources:

1BlackRock as at 31 August 2022

2MSCI as at 31 August 2022

16 September 2022

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

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