Publication of monthly factsheet

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

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

[email protected]