Portfolio Update

BLACKROCK FRONTIERS INVESTMENT TRUST PLC (LEI: 5493003K5E043LHLO706)

All information is at 31 December 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	5.1	2.3	3.6	16.7	48.1	81.2
Net asset value	0.0	-4.5	1.1	9.2	36.4	76.5
Benchmark (NR)**	2.0	-3.9	1.9	23.1	36.4	63.9
MSCI Frontiers Index (NR)	1.9	-0.8	13.4	21.3	34.4	62.7
MSCI Emerging Markets Index (NR)	4.9	4.0	13.9	29.5	54.6	47.2
US Dollars:
Share price	7.6	9.9	7.8	25.3	26.1	54.6
Net asset value	2.4	2.7	5.2	17.1	16.1	50.4
Benchmark (NR)**	4.4	3.3	6.0	31.9	15.9	40.4
MSCI Frontiers Index (NR)	4.3	6.6	18.0	30.0	14.2	38.2
MSCI Emerging Markets Index (NR)	7.5	11.8	18.4	38.9	31.4	25.1

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
US Dollar
Net asset value - capital only:	165.54c
Net asset value - cum income:	170.91c
Sterling:
Net asset value - capital only:	124.96p
Net asset value - cum income:	129.02p
Share price:	135.00p
Total assets (including income):	£311.6m
Premium to cum-income NAV:	4.6%
Gearing:	nil
Gearing range (as a % of gross assets):	0-20%
Net yield*:	5.0%
Ordinary shares in issue:	241,522,801
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 5.0% and includes the 2019 final dividend of 4.75 cents per share declared on 06 December 2019 with a pay date of 07 February 2020, and special dividend of 1.0 cents per share declared on 11 December 2018 and paid to shareholders on 7 February 2019. Also included is the 2019 interim dividend of 3.00 cents per share announced on 30 May 2019 and paid to shareholders on 28 June 2019.

**Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 September 2019.

Sector Analysis	Gross market value as a % of net assets		Country Analysis	Gross market value as a % of net assets
Financials	25.8		Indonesia	13.9
Consumer Staples	15.2		Thailand	12.3
Consumer Discretionary	14.8		Vietnam	9.3
Materials	12.0		Egypt	8.9
Real Estate	11.7		Saudi Arabia	8.8
Industrials	10.1		Philippines	6.9
Energy	9.2		United Arab Emirates	6.1
Communication Services	3.7		Pakistan	4.4
Health Care	2.1		Kazakhstan	4.1
Information Technology	1.7		Malaysia	3.9
Utilities	1.7		Turkey	3.8
	-----		Nigeria	3.4
	108.0		Ukraine	3.1
Short positions	-----		Colombia	2.7
	-1.0		PAN-Africa	2.4
	=====		Romania	2.3
			Pan-Emerging Europe	2.1
			Qatar	2.1
			Poland	2.0
			Chile	1.9
			Greece	1.7
			Kenya	1.5
			Argentina	0.4
				-----
			Total	108.0
				-----
			Short positions	-1.0
				=====

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

Market Exposure
 

	31.01  2019     %	28.02  2019     %	31.03  2019     %	30.04  2019     %	31.05  2019     %	30.06  2019     %	31.07  2019     %	31.08  2019     %	30.09  2019     %	31.10  2019     %	30.11  2019     %	31.12  2019     %
Long	115.1	112.9	113.1	116.0	111.0	114.1	117.0	111.5	110.1	108.0	107.8	108.0
Short	7.3	6.7	6.6	6.6	8.8	8.1	5.1	4.2	4.1	2.2	1.7	1.0
Gross	122.4	119.6	119.7	122.6	119.8	122.2	122.1	115.7	114.2	110.2	109.5	109.0
Net	107.8	106.2	106.5	109.4	102.2	106.0	111.9	107.3	106.0	105.8	106.1	107.0

Ten Largest Investments

Company	Country of Risk	Gross market value as a % of net assets
Astra International	Indonesia	4.1
Charoen Pokphand Food	Thailand	3.4
PTT Global Chemical	Thailand	3.2
United International Transport	Saudi Arabia	3.2
Vincom Retail	Vietnam	3.1
Bank Mandiri	Indonesia	3.0
Bank of the Philippine Islands	Philippines	2.8
Ecopetrol	Colombia	2.7
Eastern Tobacco	Egypt	2.6
LT Group	Philippines	2.5

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

The Company’s NAV returned 2.4%¹ versus its benchmark the MSCI  Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which returned +4.4% in December². For reference, MSCI Emerging Markets Index ended the month +7.5% and MSCI Frontier Markets Index up +4.3%² over the same period (all performance figures are on a US Dollar basis with net income reinvested).

Our allocations in South East Asia were the top contributors to returns in December with positions in Thailand, Indonesia and Philippines all adding to returns. In particular, our holdings in Indonesian conglomerate  Astra International (+8.1%), Philippines tobacco company LT Group (+8.7%) and Bank Mandiri (+11.8%) all did well. Our holdings in Energy were additional contributors driven by holdings in Saudi Aramco (+14.8%) and Colombian energy company Ecopetrol (+11.2%).

The largest detractor from returns this month was our holding in United Arab Emirates (UAE) hospital operator NMC Health (-26.5%) after the stock declined sharply given allegations over its accounting practices. We have since exited the position. Holdings in Egypt and Vietnam were additional detractors. In Egypt healthcare diagnostics company Integrated Diagnostics Holdings (IDH) fell 13.8% over the month. In Vietnam, holdings in food and beverage company Quang Ngai Sugar (-9.2%) and mall operator Vincom Retail (-1.5%) were additional detractors.

We made a few recent changes to the portfolio. We sold our position in UAE hospital operator NMC Health post allegations over its accounting practices, particularly its use of cash. We investigated the allegations extensively and could not get comfortable with retaining the position. We were disappointed with the response we received from the company and having lost trust in management we exited. We also exited our holding in Saudi Aramco post strong price performance in the aftermath of its IPO, as well as trimming Ecopetrol on strength.

We added to Saudi petrochemicals company Yansab given our view that the stock price is not reflecting the oil price increase.  The company also has a very strong balance sheet which should support their dividend yield. We added back to Argentina given our view that bond restructuring is becoming more likely, which should prove positive for equity holders while protecting the banking sector. In addition, we are positive on the ASEAN countries supported by their recent currency moves which have so far not translated into equity market performance. 

The highest conviction country positions in the Trust are Egypt, Vietnam and Pakistan while we remain under-weight Saudi, Malaysia and Kuwait.

We see significant value in the smaller emerging and frontier markets and believe a number of these countries are set up for a strong year in 2020. We see the markets well supported by the lower rate environment and improved local and global liquidity. Emerging Market (EM) equities have lagged with the earnings yield not following the decline in bond yields. The asset class should also get some help from foreign exchange and we note that many EM currencies look to have broken out in recent weeks. We note that several stocks in our universe are trading at extremely low valuations, which we view as an opportunity to invest in a wide subset of countries which exhibit good growth and have low government debt levels. We look for companies there with strong cash flow and high dividend yields, trading on some of the lowest valuations in the world.

Sources:

¹BlackRock as at 31 December 2019

²MSCI as at 31 December 2019

24 January 2020

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.