Publication of monthly factsheet

RNS Number : 0436S

Utilico Emerging Markets Trust PLC

06 March 2023

 

6 March 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

Monthly commentary

PERFORMANCE

UEM's NAV total return decreased by 2.6% in February, performing better than the MSCI Emerging Markets total return Index which was down by 4.7% in Sterling terms for the month.

Unlike the positive "risk-on" market rally witnessed in January, fuelled by falling inflation data and expectations that key central banks are nearing the end of their aggressive interest rate rising cycle, February saw the majority of markets experience weakness and becoming "risk-off". This swing in markets was driven by stronger than expected economic data, such as indications of a continued tight labour market from the US, indicating that a recession may not be on the horizon and subsequently inflationary pressures could persist for longer, resulting in the reduction of interest rate cuts to come later and possibly at a slower pace than anticipated. The US Federal Reserve Bank's Chairman Jay Powell also indicated that further rate increases are likely, especially if strong macro data continues to persist. During February, the Federal Bank increased rates by 25bps to 4.75%, whilst both the Bank of England and the European Central Bank increased by 50bps raising interest rates to 4.0% and 2.5% respectively. The S&P Index was therefore down for the month by 2.6%.

The Hang Seng Index declined in February by 9.4%, despite the expectation that the re-opening of China post Covid-19 might lead to a rapid consumption boom due to the high amount of savings built up during lock down. Continued geopolitical tension led to some profit taking. The Chinese A-share market weathered the geopolitical pressures better as the Shanghai Composite was essentially flat for February, up marginally by 0.7%. Other Asian markets also saw weakness, with the Philippines PCOMP Index down by 3.5%, the Thai SET Index down by 2.9% and the Vietnamese market down by 7.8%. The Vietnam Ho Chi Minh Index was also impacted by ongoing pressure arising within the property market as the second largest developer delayed a repayment of a bond, widening concerns about the property debt crisis.

The Brazilian Bovespa also declined by 7.5% in February, due to deterioration of investors' sentiment in the face of uncertain economic policy. This, combined with a dispute between the Brazilian Central Bank and Lula's government, unsettled the markets. The market is pricing no rate cuts this year, even though Brazil has one of the highest real interest rates in the world. The Mexican Bolsa was also down 3.3%.

Sterling was mixed, strengthening 2.8% against the Australian Dollar, 3.5% against the Malaysian Ringgit and 4.7% against the Thai Baht, but weakened 1.7% against the US Dollar, 4.1% against the Mexican Peso, and 1.5% against the Hong Kong Dollar. Notably the US Dollar had its first positive month since September 2022, benefitting from the expectation of an extended US monetary policy tightening cycle.

PORTFOLIO

Performance across UEM's portfolio in February was mixed with two changes to the top thirty as Aguas Andinas replaced My EG and Grupo Traxion replaced Chindata. Aguas Andinas i s the largest water and sanitation company in Chile. Its main concession area is the metropolitan region of Santiago, with its other major region in the North of the capital (Aguas Cordillera and Agias Manquehue). Grupo Traxion is a Mexican land transportation and logistics company that is currently benefitting from nearshoring as it is operating in the cargo, logistics solutions, and personnel and student transportation segments.

During the month, Kinx witnessed a share price increase of 11.7% driven partly by solid full year results, whilst Umeme, the Ugandan electricity distribution company, who announced in December 2022 that its concession will not be renewed but will be compensated for unrecovered investment, increased by 7.1%. Grupo Aeroportuario Del Pacifico, the Mexican airport operator, was also up by 7.0% on the back of continued robust results. Eletrobras' share price was down in February by 15.3% due to the sharp decrease in energy spot prices resulting from a significant improvement in reservoir levels and a potential oversupply of energy generation in the country. Inpost was also down by 11.4% and Telelink down by 10.4% on news that the minimum dividend pay-out ratio may be cut to fund growth or merger and acquisition opportunities. Overall, the portfolio saw fifteen companies witness share price increases and the remaining half, share price declines.

During February, purchases for the portfolio totalled £13.9m and realisations totalled £7.0m.

DEBT

UEM's bank debt marginally increased from £25.2m to £25.4m and was drawn as EUR 12.0m and USD 18.0m.

OTHER

UEM's share price ended February at 211.00p, down 2.3% over the month. The discount to NAV narrowed slightly to 13.7% from 14.0%. UEM bought back 0.9m shares at an average price of 215.80p in the month.

A third quarterly interim dividend of 2.15p per ordinary share in respect of the year ending 31 March 2023 was declared, which will be paid on 24 March 2023 to shareholders on the register on 3 March 2023.

Name of contact and telephone number for enquiries:

ICM Investment Management Limited  [phone]

Charles Jillings / Alastair Moreton

Montfort Communications

Gay Collins, Pippa Bailey                                                          [phone]

[e-mail]

 

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