Barings
Emerging EMEA Opportunities PLC
Half
Year Report
for
the six months ended 31 March
2024
The
Directors present the Half-Year Financial Report of the Company for
the period to 31 March
2024.
Barings
Emerging EMEA Opportunities PLC (LSE: BEMO) is pleased to declare
an interim dividend in respect of the financial period ending
31 March 2024 of 6 pence per Ordinary Share, payable on
26 July 2024 to ordinary shareholders
on the register as at 21 June 2024.
The ex-dividend date will be 20 June
2024 and the DRIP election date will be 21 June 2024.
Further
information on the Company’s dividend can be found in the
Chairman’s Statement set out below.
Financial
Highlights
for the
six-month period to 31 March
2024
KEY
PERFORMANCE INDICATORS
NAV
total return1#
|
Share
price total return1#
|
Dividend
per Ordinary Share1#
|
13.2%
|
12.8%
|
6.0p
|
(31 March
2023: -2.1%)
|
(31 March
2023: -5.0%)
|
(31 March
2023: 6.0p)
|
|
|
|
|
31
March 2024
|
31 March
2023
|
30
September 2023
|
NAV
per Ordinary Share1
|
682.1p
|
607.8p
|
617.6p
|
Share
price
|
532.5p
|
509.0p
|
483.0p
|
Share
price total return1,*,#
|
12.8%
|
-5.0%
|
-8.8%
|
Discount
to NAV per Ordinary Share1
|
21.9%
|
16.3%
|
21.8%
|
Benchmark1,*
|
5.8%
|
-5.5%
|
-3.4%
|
Dividend
yield1,2,3
|
3.2%
|
3.3%
|
3.5%
|
Ongoing
charges1
|
1.8%
|
1.6%
|
1.6%
|
RETURN
PER ORDINARY SHARE
|
31
March 2024
|
31 March
2023
|
30
September 2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Return
per Ordinary Share
|
5.54p
|
69.89p
|
75.43p
|
6.71p
|
(20.78)p
|
(14.07)p
|
14.59p
|
(13.16)p
|
1.43p
|
Revenue
return (earnings) per Ordinary Share is based on the revenue return
of £653,000 (31 March 2023: £805,000;
and the full year to 30 September
2023: £1,726,000). Capital return per Ordinary Share for the
half year is based on net capital gain of £8,245,000 (31 March 2023: net capital loss of £2,492,000;
and full year to 30 September 2023:
net capital loss of £1,557,000). These calculations are based on
the weighted average of 11,796,902 (31 March
2023: 11,991,821; and 30 September
2023: 11,829,676) Ordinary Shares in issue during the
period/year.
As at
31 March 2024, there were 11,796,902
Ordinary Shares of 10 pence each in
issue (31 March 2023: 11,807,563; and
30 September 2023: 11,796,902) which
excludes 3,318,207 Ordinary Shares held in treasury (31 March 2023: 3,318,207; and 30 September 2023: 3,318,207 shares held in
treasury). The shares held in treasury are treated as not being in
issue when calculating the weighted average of Ordinary Shares in
issue during the period/year. Since the period end and up to
31 May 2024, the Company has bought
back nil shares for cancellation.
1
Alternative Performance Measures (“APMs”) definitions can be found
in the Glossary as set out in the full report.
2 The
yield as of 31 March 2024 is
comprised of the 2023 final dividend of 11
pence per share and the interim dividend for the six months
to 31 March 2024 of 6 pence per share, based on the share price as at
31 March 2024.
3 The yield
as of 31 March 2023 is comprised of
the 2022 final dividend of 11 pence
per share and the interim dividend for the six months to
31 March 2023 of 6 pence per share, based on the share price as at
31 March 2023.
* Movement
to 31 March relates to the preceding six months and movement to 30
September relates to the preceding twelve months.
# Key
Performance Indicator.
Chairman’s
Statement
Performance
After the
turmoil of the past two years, it is a pleasure to be able to
report positive results for the six months to 31 March 2024, both in absolute terms and
relative to the benchmark. The EMEA equity markets (“EM EMEA”) in
which BEMO invests registered a gain of 5.8% over the period,
following markets globally, which were led higher in anticipation
of a peak in interest rates combined with continued economic
growth.
Against
this backdrop, we are pleased to report a significant gain in the
Company’s Net Asset Value (“NAV”), which registered a total return
of 13.2%, outperforming the benchmark, and broader emerging
markets.
The Board
are encouraged that performance continues to improve post the
write-down of Russian assets, with the portfolio ahead of the
benchmark over six months, one year and two years. Regrettably,
performance over three and five years continues to be impacted by
the negative relative performance in the 2022 financial year, with
the Company lagging the benchmark across both periods. However, the
returns remained ahead of the benchmark over seven and ten
years.
Investment
Portfolio
The strong
performance within the portfolio serves to highlight the
distinctive opportunities which the universe of EM EMEA has to
offer.
Emerging
Europe continued to reflect the
continent’s improving economic prospects against an environment of
falling energy prices and growing disposable income. Poland and Greece returned 38% and 16.3% respectively,
lifting returns in BEMO’s European region to 5.8%. The Company’s
holdings in Emerging Europe were the strongest drivers of both
absolute and relative returns, reflecting the importance of our
holdings in the financial sector that serves as a good proxy for
our markets and offers exposure to growing consumer
demand.
Turkey offered a tale of two halves over the period. During
the fourth quarter of 2023, the market declined before rapidly
rebounding in 2024 as market participants’ risk perceptions eased
with the country’s return to orthodox economic policies. This is a
view shared by the Investment Manager and, as a result, the
portfolio delivered a positive absolute return in a market which
registered a small absolute decline.
The
performance of markets in the Middle
East was more mixed. The region’s largest market,
Saudi Arabia, outperformed the
broader region, with BEMO’s portfolio benefitting from its
investments in companies that are actively contributing to the
diversification of the Saudi economy away from hydrocarbons. In
contrast, Qatar and the UAE posted
negative returns, reflecting the lower levels of market liquidity
and depth of available investment opportunities.
Whilst
absolute returns in South Africa
lagged broader EM EMEA returns, the Investment Manager‘s stock
selections generated relative outperformance in this market. This
result was achieved by avoiding companies vulnerable to the ongoing
disruption to energy supply locally, and focusing investments in
quality companies better equipped to navigate the uncertain
environment.
Russian
assets in the portfolio continue to be valued at zero whilst
extensive sanctions and restrictions on the sale of securities
remain in place. The Board, however, remains focused on how
shareholder value can be best preserved, created and realised in
relation to the holdings of Russian assets. A welcome development
over the period was the ability of the Investment Manager to take
advantage of opportunities to exit three companies, namely Magnit,
X5 and TCS, thereby releasing approximately £2.3m of value back
into the Company. While these are positive developments, the Board
will continue to value the remaining assets at zero until
circumstances permit otherwise. Consequently, there is no exposure
to Russia in the Company’s NAV,
and management fees are not being charged on these
assets.
Discount
Management
The
discount at 31 March 2024 was 21.9%
and the average discount during the period was 21.8%. This compares
with a discount of 16.3% at the 31 March
2023.
The Board
remains focused on discount management, with the aim of containing
the discount. However, whilst share buybacks continue to be an
option available to the Company to help manage the discount, they
are significantly less effective during periods of elevated market
volatility, as has been the case recently. As a result, the Company
has not bought back any shares during this financial
period.
Gearing
There were
no borrowings during the period. At 31 March
2024, there was net cash of £1.9 million (30 September 2023: £3.9 million). The Company
does not currently use a loan facility but keeps its gearing policy
under review.
Interim
Dividend
In the
first half of the financial year, the portfolio generated an income
return of 5.5 pence per Ordinary
Share, compared with 6.7 pence for
the same period last year. The Directors are proposing an interim
dividend of 6 pence per share, which
maintains the dividend at the same level as last year by utilising
revenue reserves.
Based on
dividends paid over the prior 12 months and the share price as at
31 March 2024, the Company’s shares
yielded 3.2%. The Board believes that this remains an attractive
yield. The Investment Manager continues to believe the income
potential of the portfolio will grow over the medium term and that
this growth will be sustainable. The Board retains the flexibility
to pay out up to 1% per annum of NAV from capital as income to
Shareholders.
Outlook
Looking
ahead, global equity markets are likely to continue to be driven by
news flows surrounding the potential decline of inflation and a
loosening of monetary policy by US and western central banks.
Although the oil price rebound in recent months may limit central
banks' scope to reduce interest rates, equity markets should
continue to benefit from broadly robust and uninterrupted growth,
allaying widespread concern that monetary policy designed to bring
down inflation might also lead to stagnation or even
recession.
While the
global outlook remains uncertain, we are beginning to see an
increasingly constructive view within emerging markets, as the
monetary policy tightening cycle turns ahead of developed markets.
Meanwhile the absolute valuation of EM equities, and the relative
valuation versus developed equities, appears attractive, suggesting
investor expectations for the asset class remain overly depressed.
This creates the potential for increasing interest in the asset
class in general and EMEA markets in particular.
In this
connection, we already see an improving economic picture across a
number of countries in the portfolio. Within Emerging Europe,
financials continue to represent a significant portion of the
portfolio, and the Investment Manager is positive on the prospects
for the sector. In addition, Emerging Europe is also buoyed by
strong growth in real household income, which has reached its
highest level relative to developed Europe. Against this backdrop, the Investment
Manager sees opportunities in residential real estate and
broadening discretionary consumption as consumers benefit from this
stronger buying power.
Turning to
the Middle East, economies
continue to benefit from low inflation, healthy consumption growth
and high capital investment. A particularly strong performer as
regards investment is Saudi
Arabia, which is channelling the revenue derived from its
oil sector back into other areas of its economy, spurring domestic
demand and increasing the relative contribution of non-oil sectors
to the economy’s overall performance. On this basis, the Investment
Manager continues to identify exciting opportunities for medium
term growth across a number of sectors.
South Africa, by contrast, has continued to face more
challenging economic conditions with the problems of the country’s
electricity supply persisting amid a rising political risk in the
run-up to the imminent national elections. While remaining on the
alert for positive opportunities post-elections, the Investment
Manager continues to remain selective, focusing on companies with
business models and high quality management that mitigate risks
posed by economic uncertainties.
Director
appointment
The Board
was delighted to welcome Alastair
Bruce as a Non-Executive Director of the Company and Chair
of the Audit Committee on 1 February
2024. Alastair has substantial Board experience of
investment trusts and is already proving to be a valuable member of
the Board.
Promotional
activity and keeping shareholders informed
The Board
and Investment Manager have in place an ongoing communications
programme that seeks to maintain the Company’s profile and its
investment remit, particularly amongst retail investors. Over the
review period we have continued to distribute our monthly BEMO News
which is emailed to engaged supporters, including many hundreds of
the Company’s shareholders. These emails provide relevant news and
views plus performance updates and links to topical content. If you
have not already done so, I encourage you to sign up for these
targeted communications by visiting the Company’s web page
at
www.bemoplc.com and
clicking on ‘Register for email updates’.
Frances Daley
Chairman
6 June 2024
Report
of the Investment Manager
Our
strategy seeks to diversify your portfolio by harnessing the
long-term growth and income potential of Emerging EMEA. The
portfolio is managed by our team of experienced investment
professionals, with a repeatable process that also integrates
Environmental, Social and Governance (“ESG”) criteria.
Our
strategy
|
|
|
|
Access
Experienced investment team helps to foster strong relationships
with the
companies in which
we invest.
|
First-hand
Expertise
The investment team conducts hundreds of company meetings per year,
building long term relationships and insight.
|
Process
Extensive primary research and proprietary fundamental analysis,
evaluating companies
over a 5-year research horizon with macro considerations
incorporated through our Cost of Equity approach.
|
ESG
Integration
Fully integrated dynamic ESG assessment combined
with active engagement to positively influence
ESG practices.
|
A detailed
description of the investment process, particularly the ESG
approach can be found on pages 18 to 19 of the Annual Report and
Accounts for the year ended 30 September
2023.
Market
Summary (All
numbers quoted in GBP)
Over the
period EMEA equities were stronger, along with most equity markets
globally. Markets rose in anticipation that the US Federal Reserve
would cut interest rates in 2024, earlier than previously expected.
A combination of falling inflation and weaker economic data
reinforced the belief that policymakers had passed the peak of the
tightening cycle, prompting a rally in risk assets, notably in the
latter stages of Q4 2023. Against this backdrop, the Company’s NAV
increased by 13.2%, significantly outperforming the MSCI EM EMEA
benchmark which rose by 5.8%.
Emerging Europe
Markets
within Emerging Europe were some of the best performers over the
period, continuing the trend of outperformance during 2023.
Poland returned 38.0%, as equity
markets responded positively to Donald Tusk’s Civic Platform-led
government, with its more constructive approach towards both
internal and external affairs. Elsewhere in the region,
Greece returned 16.3%, supported
by news that its sovereign risk rating had been upgraded to
investment grade status. The Turkey story was mixed. The market’s negative
return of -2.9% reflected the Lira’s weakness, but there was an
upturn in Q1 2024 amid improved risk perceptions on the back of the
country’s return to orthodox economic policies. This gave support
to the Lira, and boosted the performance of the banking
sector.
South
Africa
South
African equities ended the period largely flat, returning 1.4%,
reflecting the ongoing electricity supply crisis which plagued the
economy in 2023. We are, however, seeing tentative signs of
improvements, allowing for a more constructive outlook for domestic
consumption to rebound and support the economy.
Middle
East
The
performance of markets in the Middle
East was mixed. The region’s largest market, Saudi Arabia, returned 10.1%, whilst
Qatar and the UAE posted negative
returns of -2.5% and -6.1% respectively. Egypt was the weakest market in the region,
down -16.8%, reflecting a devaluation in the currency that was
required as part of a deal with the International Monetary Fund
(“IMF”). The region’s major markets are strongly influenced by the
oil price, which drifted lower in Q4 2023 in response to concerns
of a slowing global economy before rebounding, as such concerns
eased, despite fears of wider conflicts in the Middle East which have the potential to
disrupt oil supply.
EMEA
Market Performance (in GBP, based on MSCI
indices)
Currency
Returns (local currency returns vs. GBP)
Country
Returns
|
|
|
Currency
Returns
|
|
|
|
|
|
|
Poland
|
38.0%
|
|
Poland
|
5.9%
|
Greece
|
16.3%
|
|
Greece
|
-1.4%
|
Hungary
|
13.5%
|
|
Hungary
|
-2.5%
|
Saudi
Arabia
|
10.1%
|
|
Saudi
Arabia
|
-3.4%
|
Kuwait
|
4.4%
|
|
Kuwait
|
-2.9%
|
South
Africa
|
1.4%
|
|
South
Africa
|
-3.4%
|
Qatar
|
-2.5%
|
|
Qatar
|
-3.4%
|
Turkey
|
-2.9%
|
|
Turkey
|
-18.1%
|
U.A.E
|
-6.1%
|
|
U.A.E
|
-3.3%
|
Czechia
|
-6.8%
|
|
Czechia
|
-4.9%
|
Egypt
|
-16.8%
|
|
Egypt
|
-37.0%
|
Source:
Barings, Factset, MSCI, March
2024
Source:
Barings, Factset, MSCI, March
2024
Eastern
European markets were some of the strongest performers in absolute
terms, whilst markets such as Turkey and Egypt were impacted by
depreciation.
Income
The
Company’s key objective is to deliver capital growth from a
carefully selected portfolio of emerging EMEA companies. However,
we are also focused on generating an attractive level of income for
investors from the companies in the portfolio.
Whilst
dividend inflows to the portfolio remain below historical averages,
due to the exclusion of Russia
from the investment universe, rising pay-out ratios, and an
encouraging economic environment, most notably in the Middle East and Emerging Europe, should
contribute positively to revenue growth for the portfolio over the
medium term. Importantly, we believe that revenue growth will be
sustainable.
Macro
Themes
In
line with our bottom-up approach, our primary focus is to identify
attractive investment opportunities at the company level for our
Shareholders. Nevertheless, we remain vigilant and mindful of
broader macro effects within the region. This in turn helps to
support the contribution to performance from our company selection,
accessing long-term growth opportunities, while reducing the
effects of declines in performance from major macro
dislocations.
Middle East:
Rising Tensions
The
ongoing violence in the Middle
East is an obvious risk factor. Tensions remain high which
has increased volatility in the price of crude oil and is a clear
barometer of risk sentiment. The impact of the continuing violence
and elevated tensions in the Middle
East since October 2023 has
had a relatively limited impact on the region’s markets, in part
owing to the effect of the conflict in supporting the oil price. We
remain extremely selective in our investment approach putting
greater focus on companies’ medium-term earnings profile, and how
markets currently value that prospective earnings growth. Despite
the difficulty in forecasting the magnitude and duration of the
current hostilities, our outlook for the region continues to be
supported by a healthy level of domestic investments in support of
companies that keep pace with the development of economic and
social reform agendas.
Turkey:
Economic Renewal
One of the
standout performers of Q1 2024 was Istanbul’s stock market, boosted
by Turkey’s efforts to anchor inflation expectations and build
trust among market participants. A significant increase in
international investment inflows followed confirmation from the new
governor of the Central Bank of Turkey of his commitment to taming inflation,
by increasing benchmark interest rates by 5% to 50%. This bold move
was seen as a sign that clearer and more consistent economic
policies are set to continue, and by doing so laid the foundations
for greater trust from the international investment community. This
was noticeable in the outperformance of the economically sensitive
banking sector, which delivered a substantial return in response to
Turkey’s declining risk premium.
Following
the period end, Turkey’s nationwide municipal elections resulted in
a resounding opposition gain against President Erdoğan’s AKP party,
with voters focusing on inflation as a critical issue. We believe
this result is a positive development for the market, with voters
sending a clear message to Erdoğan that the key focus should be to
support Turkey’s finance team, led by Mehmet Simsek, to continue the path of orthodox
economic policies and Central Bank independence. Accordingly, we
consider the Istanbul stock
market’s combination of deep liquidity, attractive valuations and a
substantial number of high-quality management teams as unique. We
remain overweight Turkish equities relative to the portfolio’s
comparator benchmark with a focus on domestically exposed sectors
such as financials and retailers.
The
benefits of bottom-up stock selection continued to pay dividends in
Turkey as our top selection picks,
which were concentrated in domestic retailer, BIM and an industrial
conglomerate, KOC, helped deliver a positive absolute return in a
market which declined.
South Africa:
Elections
2023 saw
South Africa contend with
significant “Load Shedding”. This refers to strategic blackouts,
where households and businesses are left without power for between
six to twelve hours a day to ease pressure on the grid, thus
allowing electricity to be provided for critical services. The
impact of this program has been significant, acting as an economic
drag, particularly for industries where re-scheduling operations is
unfeasible – such as retailers and telecommunications services.
Lower footfall in shops and loss of service on phone networks has
reduced profit margins.
The
problems have, however, begun to show signs of easing and served to
focus attention on the failings of the ruling African National
Congress (ANC) party, which has been governing South Africa uninterrupted since 1994.
Interestingly, this comes at a crucial time given the parliamentary
elections took place on 29 May, as a result of which the ANC lost
its majority for the first time in recent history. Whatever the
ultimate outcome of the election in light of ongoing coalition
deliberations, the weakened support could force the ANC into
conducting the much-needed reforms required to stimulate essential
increases in capital investments.
We
continue to be selective in our equity holdings within South Africa and remain focused on well
managed companies which can capitalise on the improving macro
picture.
Central Europe:
Household income growth
With
inflationary effects abating over the course of 2023, Central
European real household income growth started to gather momentum,
driven by a powerful mix of foreign direct investment, tight labour
markets, productivity gains and a strong export sector. This has
left the region’s household income growth rates at an unparalleled
level in a European context. Against this backdrop, we see
discretionary consumption and residential real estate as key areas
which stand to benefit from the resurgent buying power of Central
European consumers.
Greece:
Manufacturing Renaissance
Whilst
historically Greece has been
associated with its pleasant beaches, impressive landscapes and
ancient culture, under the radar Greece is quietly undergoing a manufacturing
renaissance which has added to its already impressive position as a
tourist destination. This is best exemplified by Greece’s
Manufacturing Industrial Production Index reaching a 15-year high,
and a significant rise in job creation and GDP growth.
Russia
While the
Company has taken the decision to value its Russian assets to zero
following the invasion of Ukraine
in 2022, it remains focused on how shareholder value can best be
preserved, created, and realised in relation to the holdings of
Russian assets. Given the nature of enforced regulatory
restrictions, our approach has been to look at each security in
isolation and ensure any potential action taken complies with all
necessary sanctions. Following this analysis, opportunities have
arisen over the period to exit three companies, namely Magnit, X5
and TCS. We welcome this positive development and continue to
remain vigilant for any future opportunities.
Portfolio
Country Weight
|
|
Portfolio
Sector Weight
|
|
|
|
Saudi
Arabia
|
31%
|
|
Financials
|
48%
|
South
Africa
|
26%
|
|
Materials
|
15%
|
U.A.E.
|
10%
|
|
Communication
Services
|
10%
|
Qatar
|
6%
|
|
Consumer
Discretionary
|
11%
|
Poland
|
8%
|
|
Real
Estate
|
4%
|
Hungary
|
4%
|
|
Industrials
|
5%
|
Turkey
|
4%
|
|
Consumer
Staples
|
3%
|
Kuwait
|
5%
|
|
Energy
|
3%
|
Greece
|
4%
|
|
Information
Technology
|
1%
|
Czechia
|
2%
|
|
|
|
Source:
Barings, Factset, MSCI, March
2024
Source:
Barings, Factset, MSCI, March
2024
Company
Selection
Our
team regularly engages with management teams and analyses industry
competitors to gain an insight into a company’s business model and
sustainable competitive advantages. Based on this analysis, we seek
to take advantage of these perceived inefficiencies through our
in-depth fundamental research, which includes an integrated
Environmental, Social and Governance (ESG) assessment, and active
engagement, to identify and unlock mispriced growth opportunities
for
our
Shareholders.
Stock
selection significantly improved the portfolio’s relative return
over the period, whilst sector asset allocation had a small
negative impact.
The
contribution from financials was the largest contributor from a
sector perspective and was supported from a number of different
regions within EM EMEA. We are pleased to report that our top five
investments in this sector contributed 75% of the portfolio’s
outperformance relative to the comparator benchmark over the last
six months. This reflects our focus on stock selection from a broad
universe of 57 financial companies.
In
Emerging Europe, PKO Bank Polski, Poland’s largest bank, was the
standout performer, as the bank benefited from the improving
political landscape following the results of the country’s general
election. In Greece, the financial
sector benefited from an improving economic picture as tourist
levels continued to grow and the country’s debt rating was upgraded
to investment grade by all major rating agencies. In South Africa, Capitec also outperformed,
benefiting from its strong brand loyalty to cross-sell insurance
and investment products to its customers whilst increasing its
digital presence through its on-line app. Lastly, in the
Middle East, Tadawul and Al Rajhi
rallied in response to perceptions that inflation has peaked,
opening the way to US Fed interest rate cuts. This would support
the earnings of both companies with lower funding costs, against a
backdrop of higher investor activity within Saudi Arabia.
Our
underweight position in resources, materials and energy, also
contributed positively, as a number of unowned companies across the
region saw a deteriorating earnings outlook. In South Africa, chemicals and energy company
Sasol declined in response to ongoing operational issues and a
persistent downturn in chemicals pricing, which continued unabated.
Aramco, our largest underweight within energy, was also weak, as
Saudi Arabia chose to shoulder the
largest portion of the OPEC+ supply cuts, lowering the national
champion’s production volumes.
Despite
reducing our underweight in health care, the sector had a negative
impact on relative performance following the strong performance of
a small number of benchmark holdings. To date, we have invested in
the Saudi private hospital operator Dr Sulaiman Al-Habib Medical
Services Group Co., which we believe over time will be supported by
the ongoing regulation and reforms enacted by the Saudi government,
and the company’s track record of generating shareholder value. In
the UAE, real estate developer Aldar underperformed as investors
questioned the company’s capital allocation strategy in light of
its investment in several assets outside of the UAE.
In light
of the strong market rally, the portfolio’s small allocation to
cash ended the period as the largest detractor to relative
performance.
Engagement
Case Study
Impala
Platinum
We
regularly engage with companies with the aim of improving corporate
behaviour or enhancing disclosure levels.
Overview:
|
We engaged
with Impala Platinum, a South African mining company, to understand
its response to an elevator accident which led to fatalities in one
of its mine shafts.
|
|
|
|
|
Objective:
|
Our aim
was to understand the safety response of Impala Platinum, including
the immediate impact on families, the breadth of its investigations
and plans for improvement.
|
|
|
|
|
Outcome:
|
Following
reports of the accident, we contacted the company to request they
answer a range of questions. The company was prompt to respond,
confirming that the impacted shaft remains closed, subject to
required repairs and securing approval from the regulator to
re-open. In addition, the remaining shafts were all proactively
stopped by the company and subsequently re-opened with full support
from the regulator.
|
|
A formal
investigation by the regulator followed by an inquiry into the
incident/findings has commenced (normal time to conclusion 6-24
months). This will be accompanied by multiple independent and
coordinated investigations – a formal investigation and inquiry
process overseen by the regulator – internal and independent expert
investigations commissioned by the company and overseen by the
board.
|
|
Based on
this response, we believe the company has evidenced a robust
response, and we have encouraged the company to make this
information public and will continue to monitor for
improvement
|
Outlook
The
diversity of the three dominant regions within Emerging Europe,
Middle East and Africa continues to provide a unique
opportunity set that has a low correlation to other EM regions. In
addition there is support from favourable macro dynamics, such as
reforms, wage growth in real terms, and capital flows.
Whilst the
political landscape in the Middle
East remains uncertain, we retain conviction that the
favourable economic backdrop of low inflation, growing labour
participation, and substantial capital investment, should support
the long-term positive outlook for the region. Given the richer
valuations on offer, we remain selective, focusing on areas of the
market where we believe there remains support from structural
growth opportunities, and remaining disciplined when determining
the value of our investments. As Middle Eastern markets remain
underrepresented within investor portfolios, interest in the
region’s economic and structural tailwinds should help increase
demand for the region’s equity markets.
Within
emerging Europe, the full
potential of Turkey’s pivot to an orthodox monetary policy has yet
to be realised and is unlikely to be fully discounted by market
participants for several years. The benefits of the economic
reforms will certainly not be linear, and the risk of a U-turn by
President Erdoğan will likely be tested as Turkey’s economy begins
to slow, digesting the central bank’s deposit rate, which stands at
50%. Longer term however, Turkey’s unique geographical location
which straddles both the Middle
East and Europe, combined
with favourable demographics and high productivity growth rates,
could propel Turkey onto the radar
of the wider investment community.
South Africa has faced its fair share of economic and
structural challenges. However, we believe we are at, or near to a
trough. Whilst the economic recovery will be gradual, we hope that
the government that emerges from the recent elections will have the
political capacity to enact a much-needed reform agenda. We
continue to be extremely selective in our positioning within
domestically focused SA companies, with our largest remaining
exposure being the regional bank Capitec.
Baring
Asset Management Limited
Investment
Manager
6 June 2024
Detailed
Information
Barings
Emerging EMEA Opportunities PLC's Half Year Report for the period
ended 31 March 2024 is available
at https://www.barings.com/en-gb/investment-trust/the-trust/financial-statements
It has
also been submitted in full unedited text to the Financial Conduct
Authority's National Storage Mechanism and is available for
inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism in
accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules.
For
any enquiries please contact:
Quill
PR +44
(0)20 7466 5050
Nick Croysdill, Sarah
Gibbons-Cook
About
Barings Emerging EMEA Opportunities PLC
"Finding
quality companies from Emerging Europe, the Middle East and Africa."
Barings
Emerging EMEA Opportunities PLC (the "Company") is a UK based
investment trust that was launched on 18
December 2002 and is managed by Baring Fund Managers
Limited.
In
November 2020, the Company broadened
its investment policy to focus on growth and income from quality
companies in the Emerging Europe, Middle
East and Africa ("EMEA")
region. It also changed its name from Baring Emerging Europe PLC to
Barings Emerging EMEA Opportunities PLC at the same
time.
For more
information, and to sign up for regular updates, please visit the
Company’s website: www.bemoplc.com
LEI:
213800HLE2UOSVAP2Y69