|Utilico Emerging Markets
||ORD 10P (DI)
||EPS - Basic
||Market Cap (m)
|Equity Investment Instruments
Utilico Emerging Markets Share Discussion Threads
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|I liked the way he admitted being wrong about oil, expecting $20 a barrel.
EM were talked about a lot early last year, then got whacked after the US election. Still hope for UEM to rise a bit more to convert some in February, bought myself some UEMS last year, a bit dear mind you considering the price today.|
|Thanks - I didn't pick that up. He often has some offbeat ideas which are either right or at least thoughtful.
In the following para he writes: "Mr Trump is openly scornful of leading emerging market economies such as China and Mexico ... Now just suppose Mexico does free-trade deal with China (why not, now?) and the trans-Pacific ships clog up the seaways. China would do that, so would Mexico if pushed.|
|UEM is mentioned in this FT article about 2017 and "investing under Trump"
|The November factsheet is out:
Results a bit gloomy for the month, but nothing new if one reads about generic financial news:
* President Elect Trump spooked the EM sector.
* Stronger Sterling, lower EM currencies.
* $ likely to strengthen so hitting EM economies who have borrowed in $.
Power Grid Corporation of India LTd is doing well and has entered the top 20 investments.
The discount is slightly down but for the wrong reason: 9.9% drop in NAV.|
|The interim report is out:
|Taken from Lazard, who have reduced.|
|Further buyback, all helps the nav|
|Emerging markets have ‘good chance of massively outperforming’
For those with an FT Premium account:
"Paul Jackson, head of multi-asset research at Source, points to the cyclically adjusted price-to-earnings ratio, known as Cape, which values stocks compared with a 10-year moving average of their earnings.
As of the end of August this ratio was 12.6 in emerging markets, comfortably below its long-run average of 20.2, according to Source, as shown in the chart. Moreover, this Cape reading is lower than in any other region of the world, with Europe ex-UK currently trading on a ratio of 12.9, the UK on 15.4, Japan on 21.4 and the US on 25.7. The global average is 17.8.
While Cape tends to be a relatively long-term indicator, Mr Jackson believes emerging markets should get a more immediate boost from a pick-up in dividend payments."|
|Gave notice to convert at end-August. Gets the dividends, at least.|
The manager’s view: Investment opportunities abound
The manager approaches the market as an owner of assets, without reference to the composition of the MSCI Emerging market index. For example, the portfolio has no exposure to Russia or South Africa, which are sizeable weightings within the index. He highlights two countries where portfolio exposure has been increased: Romania and Mexico.
Romania – the country has a population of 20 million, with GDP per capita of $22,000. It has benefited significantly since the IMF bailout in 2009; there is now more monetary and fiscal prudence at the government level and there is a more conservative approach to investment at the corporate level. Romania is one of the fastest growing economies in Europe; the IMF forecasts GDP growth of 4.2% in 2016 and 3.6% in 2017 vs 2.0% and 2.1% respectively for Europe as a whole. There is strong domestic consumer demand and wages are growing; core inflation is positive and rising. UEM’s investments in the country are primarily in electricity, gas and oil transmission; these are natural monopolies with clear regulation. Historically state-run and inefficient, there is potential for significant cost cutting at these companies. Balance sheets are solid and free cash flow generation strong, with a large percentage returned to shareholders as dividends. Although one-third of the increased exposure during FY16 was a result of share price performance, the manager still believes that valuations of Romanian companies remain attractive.
Mexico – the country has a population of 136 million, with GDP per capita of $10,765. The manager considers the economic background stable, with GDP and inflation running around 2.5%. He highlights airports as attractive investments, with passenger numbers rising by more than 8% pa in recent years. Flight penetration is low and demand is increasing, led in part by the rising middle classes. There is a change in mind-set as passengers increasingly switch from buses to airplanes for domestic travel; in 2006 buses had a 93% market share, which declined to 91% in 2015, with air transportation increasing.
The manager highlights the consistency of the investment strategy; he has no shortage of potential investment ideas; targeting 15% total return pa. He says that the biggest challenge over the last 12 months has been exchange rates such as the Brazilian real, which has been very volatile. From mid-June to late-September 2015 the real fell by more than 35% and between late-January to the end of June 2016 it rallied by more than 20%. The portfolio is not hedged due to the expense involved and the manager sees diversification as the best way to address currency volatility, rather than trying to predict forex movements.|