BlackRock Frontiers Investment Trust Plc - Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 31 March 2019 and unaudited.

Performance at month end with net income reinvested.
 

	One  month %	Three months %	One  year %	Three  years %	Five  years %	Since  Launch* %
Sterling:
Share price	-2.9	0.2	-14.7	40.4	36.5	75.3
Net asset value	1.1	3.7	-10.0	39.5	44.8	81.0
Benchmark (NR)**	1.7	3.7	2.6	50.9	47.6	66.8
MSCI Frontiers Index (NR)	3.3	4.5	-8.5	34.7	31.7	49.8
MSCI Emerging Markets Index (NR)	2.9	7.4	-0.3	49.6	53.3	38.9
US Dollars:
Share price	-4.9	2.6	-20.7	27.5	7.0	47.2
Net asset value	-1.0	6.2	-16.4	26.6	13.4	51.7
Benchmark (NR)**	-0.4	6.1	-4.7	36.8	15.3	40.5
MSCI Frontiers Index (NR)	1.2	6.9	-15.0	22.1	2.9	25.2
MSCI Emerging Markets Index (NR)	0.8	9.9	-7.4	35.6	19.8	16.1

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 Ordinary Shares
US Dollar
Net asset value - capital only:	173.28c
Net asset value - cum income:	175.48c
Sterling:
Net asset value - capital only:	132.97p
Net asset value - cum income:	134.66p
Share price:	133.00p
Total assets (including income):	£324.1m
Discount to cum-income NAV:	1.2%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	4.8%
Ordinary shares in issue:	240,672,801
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 4.8% and includes the 2018 final dividend of 4.40 cents per share and special dividend of 1.00 cents per share, both of which were declared on 11 December 2018 and were paid to shareholders on 7 February 2019. Also included is the 2018 interim dividend of 3.00 cents per share announced on 17 May 2018 and paid to shareholders on 29 June 2018.

**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2018.

Sector Analysis	Gross market value as a % of net assets		Country Analysis	Gross market value as a % of net assets
Financials	31.0		Indonesia	14.2
Real Estate	16.8		Egypt	9.4
Consumer Discretionary	13.7		United Arab Emirates	8.9
Consumer Staples	10.5		Vietnam	8.9
Industrials	8.7		Malaysia	8.8
Energy	8.0		Argentina	8.3
Materials	7.7		Thailand	7.6
Health Care	7.6		Kazakhstan	7.2
Communication Services	6.6		Romania	5.4
Utilities	1.3		Nigeria	4.9
Information Technology	1.2		Greece	4.3
	-----		Philippines	3.1
	113.1		Turkey	2.8
Short positions	-----		Poland	2.7
	-6.6		Kuwait	2.5
	=====		Ukraine	2.5
			PAN-Africa	2.3
			Qatar	2.3
			Saudi Arabia	2.1
			Kenya	2.0
			Hungary	1.5
			PAN-Asian	0.8
			Morocco	0.6
				-----
			Total	113.1
				-----
			Short positions	-6.6
				=====

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

Market Exposure
 

	30.04  2018     %	31.05  2018     %	30.06  2018     %	31.07  2018     %	31.08  2018     %	30.09  2018     %	31.10  2018     %	30.11  2018     %	31.12  2018     %	31.01  2019     %	28.02  2019     %	31.03  2019     %
Long	113.2	119.5	116.2	113.9	107.7	107.7	107.8	108.1	109.3	115.1	112.9	113.1
Short	3.8	4.2	4.7	5.1	6.4	7.7	6.8	8.6	8.6	7.3	6.7	6.6
Gross	117.0	123.7	120.9	119.0	114.1	115.4	114.6	116.7	117.9	122.4	119.6	119.7
Net	109.4	115.3	111.5	108.8	101.3	100.0	101.0	99.5	100.7	107.8	106.2	106.5

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Banco Macro	Argentina	3.6
LT Group	Philippines	3.1
Vincom Retail	Vietnam	3.1
Eastern Tobacco	Egypt	2.9
Thai Beverage Plc	Thailand	2.8
Emaar Properties	United Arab Emirates	2.8
Halyk Savings Bank	Kazakhstan	2.8
Kaz Minerals	Kazakhstan	2.7
Astra International	Indonesia	2.7
Zenith Bank	Nigeria	2.7

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

The Company’s NAV returned -1.0%¹ versus its benchmark, the MSCI New Frontier benchmark, which fell by 0.4%². For reference, the MSCI Frontiers Index rose by 1.2%², and the MSCI Emerging Markets Index rose by 0.8%², over the same period (all performance figures are on a US Dollar basis with net income reinvested). While the aggregate indices were relatively flat for the month overall, the numbers mask quite a bit of movement at the country and stock level. 

Stock selection in Indonesia, Egypt and Kuwait were the largest contributors to returns in March.  Indonesia was the strongest contributor to performance during the month driven by our holdings across the market in real estate, energy and financial sectors, which all posted double digit returns versus +0.62% for MSCI Indonesia.  Egyptian tobacco manufacturer, Eastern Tobacco Company (+11%), drove performance in that market, alongside diagnostics company, IDH (+7%).  Our position in National Bank of Kuwait (+12%) was an additional contributor.

Our Argentine positions were the largest detractors from returns over the month as our holdings in financial, Banco Macro (-9%), commercial real estate company, IRSA (-20%) and electric utility, Pampa Energia (-13%), all sold off.  The Argentine market was spooked by a selloff in Turkey as well as increasing uncertainty around the country’s presidential elections later in the year.  Our holdings in Turkey detracted after policymakers chose to try and control the currency ahead of municipal elections, causing a squeeze in the offshore market and ultimately a sharp selloff in both bonds and equities.  Our holding in UAE hospital operator NMC (-18%) was an additional detractor after reporting worse than expected earnings results and corporate governance concerns.

In terms of positioning the portfolio, we returned from a trip to Nigeria with a lower growth outlook for the country and have trimmed our holdings there.  We have concerns about the future direction of state intervention and see little hope of the needed investment in infrastructure or measures to resolve the fiscal deficit.  In Turkey, where elections appear to have resulted in a surprise loss for the AK party despite heavy campaigning, we are watching the actions of the central bank and their actions to defend the currency, which run the risk of hurting credibility with Turkey’s creditors.  We also had elections in Thailand towards the end of the month although results won’t be declared until early May.  Both sides are claiming victory which in our view only leads to further uncertainty and deteriorating hope of any pick up in investment.  The country continues to lose market share to cheaper and better educated markets, while valuations remain expensive and profitability depressed.  Our team will be travelling to the region this month to review the situation on the ground and we will also be visiting Azerbaijan, Kazakhstan and Uzbekistan.

While emerging and frontier markets delivered a strong first quarter return for 2019, indicators of market sentiment look far from overstretched particularly in the smaller markets in which we invest.  We continue to position for a positive environment for emerging and frontier markets in aggregate, supported by a lower rate environment.  Overall, the wide subset of countries that make up our investible universe continue to exhibit strong GDP (Gross Domestic Product) growth, have low government debt levels and represent an opportunity to invest in companies with strong cash flow and high dividend yields, on some of the lowest valuations in the world.

12 April 2019

Sources:

¹BlackRock as at 31 March 2019

²MSCI as at 31 March 2019

ENDS

Latest information is available by typing www.blackrock.co.uk/brfi on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on BlackRock’s website (or any other website) is incorporated into, or forms part of, this announcement Kazakhstan

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