Company Announcements

11 January 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

In December, UEM's NAV total return decreased by 0.9%, although this was an outperformance against the MSCI Emerging Markets total return Index which fell by 2.7% in Sterling terms for the month. For the year to 31 December 2022, UEM's NAV total return increased by 2.9%, significantly outperforming the MSCI Emerging Markets total return Index which fell 10.6% over the same period.

Global markets in December were generally weaker, with the Federal Reserve raising rates by 50bps to 4.5% and the committee gave a hawkish outlook indicating continued monetary tightening throughout 2023. The European Central Bank and Bank of England also raised rates in December. China suddenly and surprisingly dropped its zero Covid policy, anecdotally triggering a large wave of Covid infections although this was not reflected in official figures. We expect a short period of disruption but ultimately a return towards normality after three years of travel and other restrictions, giving rise to consumer demand. 

A mild start to the winter in Europe eased concerns over potential natural gas shortages and fuel prices generally weakened, which, if sustainable, should help ease inflationary pressures in the coming months. In Brazil, there was some volatility as investors digested what the new Lula administration might look like.

Developed markets were generally weak, with the S&P 500 declining by 5.9% during December, the Eurostoxx down 4.3% and the FTSE 100 down by 1.6%. Many of the EM indices also declined with the Brazilian Bovespa down by 2.4%, the Indian Sensex down by 3.6%, the Mexican IPC down by 6.2% and the Vietnam Ho Chi Minh down by 3.9%.

In Hong Kong, the Hang Seng Index advanced by 6.4% although the Shanghai Composite was weaker by 2.0% for December. There were modest gains of 2.0% and 0.4% respectively in the Thai SET and Bursa Malaysia Indices.

The US Dollar continued to weaken, losing 1.0% of its value against Sterling and the Euro continued its recovery, gaining 2.6% against Sterling. EM currencies were mixed, with the Chilean Peso gaining 4.2% against Sterling and the Vietnamese Dong gaining 3.5%. The Indian Rupee weakened by 2.5% and the Brazilian Real by 1.4% against Sterling for December.

PORTFOLIO

Performance across the portfolio in December was mixed with some significant positive and negative moves, which appear predominantly driven by sentiment in specific countries.

There were three changes within the top thirty with Umeme, Chindata and TAV replacing Adani Ports, TTS and Vamos. Umeme is the main Ugandan electricity distribution company, in which UEM has been invested since the IPO over ten years ago.  Chindata operates energy efficient data centres in China, Malaysia, India and Thailand with Bytedance (owner of the Tik Tok social media platform and Douyin, its Chinese equivalent) as its principal customer. TAV operates airports in Turkey and internationally.

Companies that posted strong share price gains in December included Umeme, up by 31.0%. In December, the Ugandan government formally notified Umeme that its concession, which expires in 2025, would not be renewed. Umeme is contractually entitled to compensation for unrecovered investment which amounts to approximately three times the current market capitalisation.

Other strong gainers in the month included China Gas Holdings, which continued its recovery, up by 14.7%. InPost's share price was up by 12.1% reflecting improved sentiment, Chindata was up 11.3% after strong results in November and Engie Energia Chile's share price was up by 6.6%.

Stocks that weakened materially were in Brazil and Mexico. Orizon's share price declined by 13.7% and Eletrobras was down by 11.9%. The Mexican airports, GAP and OMA both declined by 10.4%, reflecting weakness in the Mexican stock market.

During December, purchases for the portfolio totalled £6.7m and realisations totalled £5.0m.

DEBT

UEM's bank debt increased marginally to £26.1m from £25.7m reflecting exchange rate movements with £18.6m drawn in Euros (EUR 21.0m) and £7.5m in US Dollars (USD 9.0m).

OTHER

UEM's share price ended December at 209.00p, up by 1.0% over the month and in addition shareholders received a 2.15p quarterly interim dividend during December.

The discount to NAV narrowed to 13.3% from 15.7%. During December, UEM bought back 0.2m shares at an average price of 204.29p.

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