Markets recovering after tough 2018
APQ eyes further private investments
What APQ Global does:
APQ Global PLC (LON:APQ) is an investment firm with interests across Asia, Latin America, Eastern Europe, the Middle East and Africa.
The company manages a portfolio of bonds, equities and currencies with a focus on emerging markets.
The bulk of the company’s emerging markets exposure is in financials, followed by energy and basic materials.
How it is doing:
The AIM-listed firm ended the third quarter with “fairly defensive positioning” but is on track to meet its target annual dividend yield of 6%.
It paid a quarterly dividend of US$1.84 cents while book value was US$0.88 per share (69p) at the end of September, while the portfolio "rebounded significantly" in the period.
With credit exposure concentrated in government entities, financials and corporations in the energy sector, portfolio stress tests indicated there would be a 3.6% impact to book value if there was a 10% sell-off in the S&P 500 index, only a 0.02% hit if credit spreads were to widen 10% or a 0.75% dip in value if interest rates in the US were to increase by 1%.
- Last year the company reduced its emerging market equity portfolio while keeping its two strategic positions in City of London Investment Group and Anglo Pacific Group. APQ added exposure to four Turkish banks, after a sharp sell-off in August, taking advantage of attractive valuations.
- Most of the company’s overall exposure last year was in credit and government bonds, representing 47.6% of book value, followed by local currency bond exposure (31.9% of book value). EM equities accounted for 19.1% of book value.
- APQ believes the medium-term outlook will be supportive for emerging market equities, but the near-term impact of trade wars, political and economic uncertainty in Italy and increased tensions in the Middle East and the Gulf will dampen market sentiment.
- The company remains mindful of risks around the world, with the US-China trade war shows little signs of abating, the monetary policy outlook in the US and Europe increasingly points to a significant slowdown in the world economy going into next year and President Trump continues to throw the book at the post-war economic order.
- The firm believes its credit portfolio is well diversified geographically, with the largest positions concentrated in Turkey (17.4%), Argentina (14.8%) and Brazil (10.2%). In terms of sectors, credit exposure is largely in government, financials and corporations in the energy sector.
- In December, the company invested around 1% of its book value in wholesale telecommunications operator BARTR Holdings, buying a 40% equity stake.
Chief executive Bart Turtelboom said 2018 was a challenging year but APQ weathered the storm quite well and took advantage of the uncertainty in the market to make its first private investments.
The group is looking to make more private investments like BARTR Holdings.
“We now see that real value is appearing in that space, they tend to be very expensive but across financial services, corporate services we see very interesting opportunities,” Turtelboom said.
On the back of last year’s sell-off, Turtelboom said emerging markets offer “very good value”, particularly in Turkey, Argentina and Brazil.