Barings Emerging EMEA Opportunities (BEMO)

09/12/2021

Results analysis from Kepler Trust Intelligence

BEMO has reported excellent results for the year ending 30 September 2021. Absolute returns were high, with a 36.6% NAV total return for the period. On a relative basis this represents significant outperformance of the benchmark, which returned 33.3%. The shares gained 39.7% on a total return basis as the discount narrowed over the period. The mainstream emerging markets index returned just 13.3%.

The vast majority of the period reflects the performance of the broadened strategy, which invests across the EMEA region rather than focusing on Emerging Europe - the strategy changed in November 2020, before which the trust was named Baring Emerging Europe.

Kepler View

The 2021 financial year was an excellent one for BEMO's shareholders. The reflationary rally following the emergence of vaccines was excellent for the trust's region, particularly the banks, energy and materials sectors. We think this mix of sectors is a potentially valuable one and an interesting hedge for a more inflationary environment such as the one we are in.  Additionally, BEMO offers access to growth opportunities in consumer and technology-related sectors which benefit from the large and growing middle classes across the region.

Despite the strong results this year, BEMO still trades on a considerable discount of 11.6% (as of 07/12/2021). We think this could be an opportunity for long-term investors. Of course, this is a region with many risks, and the resurgence of the pandemic could see various countries in it - like South Africa - hit hard. However, the mix of countries should provide some protection against this, while the portfolio has a high potential sensitivity to any eventual recovery from an omicron wave. In the long run the exposure to global themes like the shift to renewables and the rising middle classes in the region offer the possibility of excellent returns.

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