BLACKROCK FRONTIERS INVESTMENT TRUST PLC: Portfolio Update
BLACKROCK FRONTIERS INVESTMENT TRUST PLC
All information is at 31 March 2013 and unaudited.
Performance at month end with net income reinvested
One Three Six One Since
month months months year launch* Sterling: Share price 5.4% 28.9% 31.7% 27.8% 10.1% Net asset value 0.1% 16.8% 22.3% 20.7% 8.2% MSCI Frontiers Index (NR) 0.7% 15.8% 18.6% 17.5% 0.0% MSCI EM Markets (NR) -1.8% 5.3% 10.5% 7.3% 1.0% US Dollars: Net asset value 0.2% 9.1% 15.0% 14.7% 5.3% MSCI Frontiers Index (NR) 0.7% 8.2% 11.5% 11.6% -2.7% MSCI EM Markets (NR) -1.7% -1.6% 3.9% 2.0% -1.7%
Sources: BlackRock and Standard & Poor's Micropal * 17 December 2010.
At month end US Dollar: Net asset value - capital only: 150.74c Net asset value - cum income: 153.03c Sterling: Net asset value - capital only: 99.28p Net asset value - cum income: 100.79p Share price: 104.50p Total assets (including income): £95.5m Premium to cum-income NAV: 3.7% Gearing: nil Gearing range (as a % of gross assets): 0-20% Net yield: 2.4% Ordinary shares in issue: 94,766,267
Benchmark Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)*
Financials 30.2 Nigeria 14.0 Telecommunication 15.5 Qatar 12.2 Consumer Staples 15.1 United Arab Emirates 11.0 Energy 10.3 Saudi Arabia 9.3 Industrials 7.9 Kazakhstan 9.1 Healthcare 6.4 Vietnam 6.0 Consumer Discretionary 5.0 Bangladesh 4.6 Materials 4.5 Iraq 4.5 Utilities 2.7 Ukraine 4.1 Technology 1.9 Sri Lanka 3.0
----- Argentina 2.8 Total 99.5 Croatia 2.7
----- Pan Africa 2.6 Short positions -1.2 Panama 2.4
===== Algeria 2.3 Kenya 2.1 Cambodia 2.1 Kuwait 1.8 Romania 1.1 Lebanon 0.8 Cameroon 0.8 Slovenia 0.2 ----- 99.5 ===== Short positions -1.2 ===== *reflects gross market exposure from contracts for difference (CFDs) Market Exposure
30.04 31.05 30.06 31.07 31.08 30.09 31.10 30.11 31.12 31.01 28.02 31.03
2012 2012 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013
% % % % % % % % % % % %
Long 100.8 99.2 97.2 101.9 96.5 99.1 101.0 102.0 103.4 105.1 104.1 99.5 Short 2.1 0.0 2.6 2.6 2.5 2.6 4.2 4.9 5.2 3.5 1.2 1.2 Gross 102.9 99.2 99.8 104.5 99.0 101.7 105.2 106.9 108.6 108.6 105.3 100.7 Net 98.7 99.2 94.6 99.3 94.0 96.5 96.8 97.1 98.2 101.6 102.9 98.3
Ten Largest Equity Investments
Company Country of Risk % of gross assets
Zenith Bank Nigeria 4.5% Kazmunaigas Exploration Kazakhstan 4.1% Halyk Savings Bank Kazakhstan 4.1% Etihad Etisalat Saudi Arabia 3.7% FBN Holdings Nigeria 3.3% MHP Ukraine 3.3% Qatar Telecom Qatar 3.3% Hatton National Bank Sri Lanka 3.0% Petrovietnam Fertilizer & Chemical Vietnam 2.7% Qatar Electricity & Water Qatar 2.7%
Commenting on the markets, Sam Vecht, representing the Investment Manager noted:
In March, the Frontier Markets Index returned 0.7% (in sterling terms with net income reinvested), outperforming the MSCI Emerging Markets Index which fell by
1.8%. Emerging Markets suffered as the Cyprus banking system collapsed, reminding investors of the unresolved problems in the Eurozone. The Cypriot solution of a banking 'bail-in' using unsecured deposits set a precedent which negatively impacted sentiment surrounding risk assets. Superior returns in Frontier Markets were driven by strong growth in earnings reported by underlying companies and a lack of the prolific share issuance currently hitting Emerging Markets.
The best performing market in the Frontier Market universe was Kenya. In contrast to events of 5 years ago, the Kenyan presidential election has passed off relatively peacefully. Since the month end, Uhuru Kenyatta has been sworn in as President of Kenya, emulating his father who led the country from 1964 to 1978.
Argentina rose by 11% (in sterling terms) as fears of a sovereign default, which had led to a very aggressive sell off at the end of February, subsided somewhat.
Qatar also outperformed during the month, rising. Increasing bullishness from local fund managers has seen a rotation from fixed income to equity assets. The improvement in sentiment has been driven by increased liquidity as evidenced by a more than 30% increase in deposits in the local banks over the last year.
The weakest performing market was the Ukraine. The country's proximity to the Eurozone and close financial ties with Cyprus impacted confidence in an economy which is experiencing sluggish economic growth.
The Company's NAV returned 0.1% (in sterling terms with net income reinvested), underperforming the index by 0.6%. Whilst, the portfolio was well positioned across geographies, a number of stock specific issues hurt performance.
UAE hospital operator, NMC Health, continued its strong run year to date, rising by a further 16% in March. The company reported strong results at the end of February with net profit rising 36% year on year. The company will be a key beneficiary of the introduction of private health insurance in Dubai, which we expect to be announced in the near future.
Another stock which contributed strongly to performance was Sri Lankan financial Hatton National Bank. Having reported strong numbers at the end of February, well above analyst expectations, investors have become increasingly excited about the banks prospects. The bank also substantially increased its final dividend from just under 3 Rupees in 2012 to 7 Rupees in 2013.
The largest individual detractor from performance was Cameroon based miner, Sundance Resources. A $1.3 billion takeover by Chinese company Hanlong was withdrawn as Hanlong was unable to raise sufficient financing.
The Company's performance also suffered from holdings in Kazakh miner, Eurasian Natural Resources Company, which fell along with the global commodity sector as economic data from China disappointed.
The Company is invested in 53 stocks across 22 countries.
The Company opened a position in UAE financial, Dubai Islamic Bank as we believed the franchise to be materially undervalued.
The Company reduced the positions in UAE hospital operator, NMC Health and Cambodian casino operator, Naga Corp, after a run of good performance, locking in some profits for the Company.
Although flows into risky assets slowed somewhat in March, whilst developed market Central Banks continue to aggressively provide liquidity, we would expect these flows to continue. Despite these flows, Emerging Market returns have been muted so far this year due to weaker than expected corporate results across some of the major markets and increased issuance, especially in Asia, which has absorbed much of this liquidity. In contrast to Emerging Markets, corporate results across Frontier Markets have surprised more positively and there has been minimal stock issuance.
Frontier Markets continue to stand out for their low valuations and high dividend yields. Positive structural reforms, high growth and well-capitalised, liquid banking systems leave several Frontier economies well placed in the current global environment. Frontier stocks, particularly in the domestic or consumer sectors are valued at a fraction of their emerging peers despite higher growth rates and higher margins.
19 April 2013
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 the Manager's website (or any other website) is incorporated into, or forms part of, this announcement.
-0- Apr/19/2013 15:29 GMT