REG - Utilico Emerging Mkt - Publication of monthly factsheet

Utilico Emerging Markets TrustAnnouncement

13/11/2023 11:15

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RNS Number : 2551T  Utilico Emerging Markets Trust PLC  13 November 2023

13 November 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 decreased by 4.7% in October, behind the MSCI EM total
return Index ("MSCI") which was down by 3.4% in Sterling terms in the month.
UEM's NAV total return has increased by 6.0% in the ten months to 31 October
2023, significantly outperforming the MSCI which was down by 2.5% in Sterling
terms over the same period.

 

The majority of markets struggled in October as the market continued to be
concerned about the US Federal Reserve's "higher for longer" stance given the
continued plethora of strong inflationary data being reported and continued
robustness of the US economy. US GDP growth in 3Q23 was 4.9%, higher than the
expected 4.3% GDP growth and more than double the real GDP growth of 2.1%
reported in 2Q23. Inflationary pressures continued with September's Consumer
Price Index reported at 3.7%, no change from the previous month and October's
Purchasing Managers Index remaining elevated above 50 (reflecting expansionary
territory) at 51.0. This resulted in 10-year US Treasury bonds reaching their
highest level since July 2007, a 16 year high, rising over 5.0%. The S&P
500 Index fell by 2.2% in the month.

 

The knock-on effect from the Federal Reserve indicating that there is a
possibility of another rate increase, resulted in a weakening of the EM. The
sudden renewed conflict in the Middle East further fuelled the downward
pressure on EM as risk premiums increased. In China, the Hong Kong Hang Seng
Index and Chinese Shanghai Composite Index were both down by 3.9% and 2.9%,
respectively, despite the more positive data reported. China's 3Q23 GDP growth
of 4.9% versus consensus expectation of 4.5% was a surprise, indicating that
stimulus policies changes such as rate cuts are gradually coming into effect.
However, the real estate sector still remains vulnerable and further noise
around the US cutting off China from AI chips continues to dampen market
sentiment.

 

Other EM were also weak. In Asia, the Vietnamese Ho Chi Minh Index was down by
10.9%, hampered by shaken retail sentiment, whilst the Thai Set Index and
Philippines PSEi Index were down by 6.1% and 5.5% respectively. Latin American
markets in October were also bruised, with the Chilean IPSA Index down by 7.3%
(also partly affected by the smaller than expected interest rate cut), and the
Mexican Bolsa down by 3.6%. The Brazilian Bovespa was also down by 2.9%
despite yet another Selic rate cut of 50 basis points taking the key interest
rate to 12.25%.

 

During October, the US Dollar continued to remain strong against most
currencies with the DXY Dollar Index remaining flat over the month. Sterling
was mixed, down 0.6% against the US Dollar and 0.4% against the Euro whilst
strengthened against the Brazilian Real by 0.2%, Mexican Peso by 3.3% and 2.2%
against the Indonesian Rupee.

 

PORTFOLIO

There was one change to the top thirty holdings, with CTP NV ("CTP") replacing
Vamos Locacao de Caminhoes Macquinas e Equipamentos S.A. due to relative
performance. CTP is a Central and Eastern Europe (CEE) owner and developer of
logistics properties with exposure to the Czech Republic, Romania, Hungary,
Slovakia, Serbia, Bulgaria, Poland, Austria, the Netherlands and Germany. CTP,
listed on the Euronext Amsterdam, currently has 11.0m sqm of gross leasable
area and the ability to mobilise its 20.7m sqm landbank. CTP is capitalising
on the mega trend of global trade, as businesses continue to look at
nearshoring to de-risk and shorten their supply chains to ensure they are
resilient. CEE countries are highly ranked as likely destinations. Further,
CTP is benefiting from the digital infra mega trend within the region, as
strong e-commerce growth, which comes from a lower base in CEE versus Western
Europe, is being witnessed.

 

During the month, there were five companies' share prices within the top
thirty holdings that rose. KINX, the Korean based data centre was up by 9.1%
continuing to capitalise on the digital infra megatrend, whilst CTP was up by
1.6%. The remaining 75% of the top thirty declined over the month, with Omega
Energia, a play on the energy transition megatrend, down by 23.0%, a clear
casualty of the "higher for longer" narrative coming from the US as Omega is
highly leverage and concerns arose of potential curtailment issues following a
grid outage. Inpost was down by 15.3%, as management provided weaker than
expected trading expectations ahead of 3Q23 results, whilst Santos Brasil, a
long term beneficiary from the shift in global trade, was down by 14.6% as it
reported weaker than expected September handling volumes due to one-off
events.

 

Portfolio purchases amounted to £13.4m and realisations totalled £7.5m in
the month.

 

DEBT

UEM's debt increased to £21.4m from £11.8m during the month, drawn as GBP
7.5m and EUR 16.0m.

 

OTHER

UEM's share price ended October at 209.00p, down 5.9% over the month. The
discount to NAV disappointingly widened to 16.2% from 15.1% as at 30 September
2023. UEM bought back 1.0m shares at an average price of 211.41p in the month.
This takes the total shares bought back in the seven months to 31 October 2023
to 5.5m, equivalent to 2.7% of the share capital as at 31 March 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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