REG - Utilico Emerging Mkt - Publication of monthly factsheet

Utilico Emerging Markets TrustAnnouncement

14/06/2023 11:15

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RNS Number : 7159C  Utilico Emerging Markets Trust PLC  14 June 2023

14 June 2023

UTILICO EMERGING MARKETS TRUST PLC

(LEI Number: 2138005TJMCWR2394O39)

 

Publication of monthly factsheet

 

The latest monthly factsheet for Utilico Emerging Markets Trust plc ("UEM" or
the "Company") will shortly be available through the Company's website at:

https://www.uemtrust.co.uk/investor-relations/factsheet-archive
(https://www.uemtrust.co.uk/investor-relations/factsheet-archive)

 

Monthly commentary

 

PERFORMANCE

UEM's NAV total return increased by 1.9% in May, ahead of the MSCI Emerging
Markets total return Index which was down by 0.2% in Sterling terms.

 

Equity markets were mixed in May, with concerns over the debt ceiling and the
prospect of default dominating US headlines, though this was ultimately
averted by legislation just after month end. The Federal Bank approved its
tenth consecutive interest rate increase, with the European Central Bank also
rising in the month. The S&P 500 Index was up just 0.2% over the month,
while in Europe the Eurostoxx fell 3.2%.

 

After a promising start to the year, the reopening in China looks to have
stalled, with residential sales dropping below pre-pandemic levels and factory
activity unexpectedly contracting with manufacturing PMI falling to a
five-month low of 48.8.  Whilst the Western world continues to struggle with
inflation, it is notable that China is flirting with deflation with CPI at
just 0.2%. Hong Kong's Hang Seng Index fell 8.3% whilst the Shanghai Composite
was down 3.6% in May.

 

Brazil continued to be a highlight, with the Bovespa Index up 3.7% over the
month as local markets responded positively to the consumer inflation rate
falling to just 3.9%, increasing the likelihood of interest rate cuts. With
the Central Bank rate at a six-year high of 13.75%, Brazil has one of the
highest real rates in the world and significant scope to cut rates. Brazil GDP
growth of 4.0% in Q1 also surprised on the upside, boosted by record grain
production. Elsewhere in Latam, the Mexico Bolsa declined by 4.3% while the
Chilean IPSA Index firmed by 1.0%.

 

Inflation in India fell to an 18-month low with CPI at 4.7% for April, though
the Reserve Bank of India indicated that rate cuts were unlikely in the near
term. One concern is that food inflation will rise later this year as an El
Nino weather event has now started, which usually results in hotter and drier
weather in South Asia. The Indian Sensex and the Vietnam Ho Chi Minh Index
were both up 2.5% in May.

 

In the currency markets, the US Dollar rallied, with the DXY Dollar Index
strengthening by 2.6% and USD up 1.4% against Sterling over the month. EM
currencies were mixed against Sterling, with the Brazilian Real and the
Chinese Renminbi declining 0.9% and 1.1% respectively versus GBP. In contrast,
the Vietnamese Dong was up 1.3% and the Indian Rupee firmed by 0.3% against
Sterling.

 

PORTFOLIO

The majority of investments in UEM's portfolio posted share price increases
during May. There were two changes to the top thirty holdings, with Omega
Energia and Grupo Traxion replacing GAP and BVC due to disinvestment and
relative performance respectively. Omega, a renewables operator in Brazil, was
one of UEM's top holdings a few years ago in its previous guise Omega Geracao,
a position we exited in 2019-20 on valuation grounds. This proved prescient as
the shares have significantly de-rated over the past three years and offered
an attractive re-entry level which we effected in Q1.

 

UEM's Chinese investments performed poorly in May, with Kunlun Energy falling
14.1%, Shanghai Airport down 13.4%, and China Gas declining by 11.7%. Much of
this relates to indiscriminate selling pressure in local markets, with gas
companies caught up in concerns over the real estate slowdown and airports on
consumption outlook, though the latter seemingly ignores the fact that
domestic passenger figures have now rebounded to over 20% higher than
pre-Covid levels.

 

All of UEM's top thirty in Brazil outperformed the local index, helped by
their classification as long-duration plays geared into a declining interest
rate environment. Santos Brasil's share price soared 17.8% on the back of
speculation that MSC may be interested in acquiring Santos, while Eletrobras
was up 8.2%, Omega up 7.2% and Alupar up 6.9%. In Chile, Aguas Andinas
appreciated by 9.4% and ECL rose 12.5% on the back of advancing financials and
improved hydrology prospects as El Nino typically boosts rainfall in the
country. In Mexico, OMA fell 7.1% following President Lopez Obrador's decision
to expropriate a rail line, elevating concerns that airport concessions may
also be at risk.

 

Elsewhere in Asia, notable performances were seen with KINX's share price up
9.4% and FPT up 8.4%, while ICT fell 10.1% reflecting concern over a slowdown
of global trade. India share price movements were comparatively subdued, with
GSPL up 5.4% and Indigrid down 2.5%. During May, purchases for the portfolio
totalled £2.1m and realisations totalled £14.6m.

 

DEBT

UEM's bank debt decreased from £36.4m to £33.9m and was drawn as USD 20.0m,
EUR 12.0m and GBP 7.5m.

 

OTHER

UEM's share price ended May at 219.00p, down 0.5%. The discount to NAV
disappointingly widened to 15.2% from 13.1%. UEM bought back 532,900 shares at
an average price of 225.28p in the month.

 

On 22 May 2023, UEM declared a fourth quarterly interim dividend of 2.15p per
ordinary share in respect of the year ended 31 March 2023, which will be paid
on 23 June 2023 to shareholders on the register on 2 June 2023.

 

 

Name of contact and telephone number for enquiries:

ICM Investment Management
Limited
+44(0)1372 271486

Charles Jillings / Alastair Moreton

 

Montfort Communications

Gay Collins, Pippa
Bailey
+44(0)20 3770 7913

utilico@montfort.london

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