14 February
2024
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 declined by
0.5% in January, outperforming the MSCI Emerging Markets total
return Index ("MSCI") which fell 4.3% in Sterling terms in the
month. Since 31 March 2023, UEM's NAV total return has increased by
9.1%, significantly better than the MSCI which declined by 2.2% in
Sterling terms over the same period.
Global stock markets were mixed in
January, as the continued downward trend in inflation led to the US
Federal Reserve removing its tightening bias but pushing back on
hopes of imminent rate cuts. The S&P 500 Index firmed by 1.6%,
reflecting continued concentration of the Index into the "Mag 7"
(Amazon, Apple, Google, etc). It was notable within this group that
Tesla warned on slowing EV demand and intense competition from
Chinese EV manufacturers. China exporting deflation and
undercutting global rivals in targeted sectors is a developing
trend worth watching.
In emerging markets, China continued
to disappoint, with the Hang Seng Index plunging by 9.2% and the
Shanghai Composite falling 6.3%. The month started badly with
wealth manager Zhongzhi Enterprise Group, a major player in China's
USD 3tr shadow banking sector, filing for bankruptcy due to its
exposure to the weakening property market. Notwithstanding cuts by
the Central Bank to the reserve requirement ratio, sentiment
remains poor, reflected in manufacturing activity shrinking for the
fourth straight month.
Elsewhere in Asia, the Sensex Index
hit an all-time high during the month as the bull run in India
continued, though profit-taking saw it end the month down 0.7%.
Concerns of sticky inflation were partly allayed by January CPI
easing to a 3-month low of 5.1% thanks to slowing food price rises.
The Philippines PSEi Index and Vietnam's Ho Chi Minh Index
delivered decent returns, both up 3.0% in January.
In Latam, the standout performance
came from Argentina, whose volatile Merval Index soared by 35.6% on
hopes of fiscal discipline from new President Milei. The Brazillian
Bovespa Index was more subdued, retracing by 4.8% after a very
strong run to an all-time high at the end of 2023. Interest rates
in Brazil were cut by 50bps to 11.25%, though these are still
significantly above inflation which is running at 4.5%. Elsewhere,
Chile's IPSA declined by 3.4% and Mexico's Bolsa Index was
flat.
In the currency markets, Sterling
strengthened against most currencies, up 1.6% versus the Brazilian
Real, 1.1% versus the Chinese Renminbi, and most notably 6.6%
against the Chilean Peso following a surprise 100bps rate cut in
Chile. Sterling was broadly flat against the US Dollar and the
Indian Rupee.
PORTFOLIO
There were three changes to the top
thirty holdings, with Telelink Business Services, China Datang
Renewables and Sonatel making a reappearance. Whilst Engie Brasil
and Vamos dropped out on relative performance, UEM's unlisted
investment in CGN Capital Partners Infra Fund 3 more than halved
following the receipt of c.USD 6m in initial proceeds from the sale
of some of its wind and solar projects. This was pleasing to
see.
UEM's holdings in India were the
standout performers in January, with Gujarat State Petronet's
("GSPL") share price up 19.8% and Power Grid Corp of India up 9.6%
over the month. UEM took advantage of the buoyant markets to reduce
its position in GSPL by almost a third.
In China, performance reflected the
wider market, with CITIC Telecom's share price falling by 14.9% on
noise around the expiry and renewal process for its original Macau
basic telephony concession. China Gas' share price declined by 7.4%
and Datang Renewables by 6.1%. Elsewhere in Asia, KINX continued
its strong run, up 7.1% over the month.
In Latam, BVC completed its
conversion into Holding Bursatil Regional, a holding company which
originated from the merger of the Colombian, Chilean and Peruvian
exchanges. The goal is to create a single end-to-end trading and
settlement platform for all three markets, which is expected to
drive increased trading flows and listings across the three
markets. As a business that benefits significantly from operational
leverage, the merger is expected to deliver margin
expansion.
In line with the broader market,
most of UEM's Brazilian shares retraced from end-December market
highs, with Serena Energia declining by 4.6%, Alupar by 6.3%, and
Orizon by 8.5%. But sector-specific drivers bolstered Santos and
Ocean Wilsons, up 7.6% and 10.8% respectively on speculation of
M&A activity in the ports sector and an improved outlook on
volumes. Sabesp's share price was also up 4.8% on continued
encouraging progress with the privatisation process.
In the CEE region, Inpost's share
price was up 11.5% following its trading update showing volumes up
21% in Q4 2023 with improving conditions in its international
markets. TTS's share price continued to appreciate, firming by 8.2%
over the period.
Portfolio purchases amounted to
£8.9m and realisations totalled £14.9m.
DEBT
UEM's debt decreased from £30.0m to
£25.9m during the month, drawn as GBP 3.7m and EUR
26.0m.
OTHER
UEM's share price ended January at
228.50p, decreasing 0.2% over the month. The discount to NAV
narrowed slightly to 14.5% from 14.7%. UEM bought back 1.0m shares
at an average price of 229.69p in the month. This takes the total
shares bought back in the ten months to 31 January 2024 to 8.8m,
equivalent to 4.3% 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