BlackRock Latin American Investment Trust Plc Portfolio Update
August 24 2023 - 10:48AM
UK Regulatory
TIDMBRLA
The information contained in this release was correct as at 31 July 2023.
Information on the Company's up to date net asset values can be found on the
London Stock Exchange Website at
https://www.londonstockexchange.com/exchange/news/market-news/market-news
-home.html.
BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI - UK9OG5Q0CYUDFGRX4151)
All information is at 31 July 2023 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
month months year years years
% % % % %
Sterling:
Net asset value^ 5.4 23.3 36.2 57.9 26.2
Share price 9.0 26.6 32.6 61.3 30.9
MSCI EM Latin America 3.9 14.1 23.8 52.7 24.0
(Net Return)^^
US Dollars:
Net asset value^ 6.6 26.2 44.0 54.8 23.8
Share price 10.3 29.5 40.3 58.2 28.5
MSCI EM Latin America 5.1 16.8 30.9 49.7 21.6
(Net Return)^^
^cum income
^^The Company's performance benchmark (the MSCI EM Latin America Index) may be
calculated on either a Gross or a Net return basis. Net return (NR) indices
calculate the reinvestment of dividends net of withholding taxes using the tax
rates applicable to non-resident institutional investors, and hence give a lower
total return than indices where calculations are on a Gross basis (which assumes
that no withholding tax is suffered). As the Company is subject to withholding
tax rates for the majority of countries in which it invests, the NR basis is
felt to be the most accurate, appropriate, consistent and fair comparison for
the Company.
Sources: BlackRock, Standard & Poor's Micropal
At month end
Net asset value - capital only: 489.49p
Net asset value - including income: 493.54p
Share price: 434.50p
Total assets#: £145.4m
Discount (share price to cum income 12.0%
NAV):
Average discount* over the month - 10.8%
cum income:
Net Cash at month end**: 0.4%
Gearing range (as a % of net 0-25%
assets):
Net yield##: 7.0%
Ordinary shares in issue(excluding 29,448,641
2,181,662 shares held in treasury):
Ongoing charges***: 1.13%
#Total assets include current year revenue.
##The yield of 7.0% is calculated based on total dividends declared in the last
12 months as at the date of this announcement as set out below (totalling 39.12
cents per share) and using a share price of 559.05 US cents per share
(equivalent to the sterling price of 434.50 pence per share translated in to US
cents at the rate prevailing at 31 July 2023 of $1.2867 dollars to £1.00).
2022 Q3 Interim dividend of 6.08 cents per share (paid on 9 November 2022).
2022 Q4 Interim dividend of 6.29 cents per share plus a Special Dividend of
13.00 cents per share (paid on 12 January 2023).
2023 Q1 Interim dividend of 6.21 cents per share (Paid on 16 May 2023)
2023 Q2 Interim dividend of 7.54 cents per share (Payable on 11 August 2023)
*The discount is calculated using the cum income NAV (expressed in sterling
terms).
**Net cash/net gearing is calculated using debt at par, less cash and cash
equivalents and fixed interest investments as a percentage of net assets.
*** The Company's ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating expenses
excluding finance costs, direct transaction costs, custody transaction charges,
VAT recovered, taxation and certain non-recurring items for the year ended 31
December 2022.
Geographic Exposure % of % of Equity MSCI EM Latin America Index
Total Portfolio *
Assets
Brazil 59.6 59.8 59.8
Mexico 26.6 26.7 30.1
Chile 5.5 5.5 5.9
Argentina 3.5 3.5 0.0
Colombia 2.9 2.9 1.2
Panama 1.5 1.6 0.0
Peru 0.0 0.0 3.0
Net current 0.4 0.0 0.0
Assets(inc. fixed
interest)
----- ----- -----
Total 100.0 100.0 100.0
===== ===== =====
^Total assets for the purposes of these calculations exclude bank overdrafts,
and the net current assets figure shown in the table above therefore excludes
bank overdrafts equivalent to 0.0% of the Company's net asset value.
Sector % of Equity Portfolio* % of Benchmark*
Financials 26.2 25.3
Materials 17.1 19.2
Consumer Staples 16.9 16.3
Energy 12.2 11.8
Industrials 9.5 9.0
Consumer Discretionary 7.1 1.9
Health Care 4.2 2.1
Real Estate 2.6 0.7
Communication Services 2.2 6.7
Information Technology 2.0 0.5
Utilites 0.0 6.5
----- -----
Total 100.0 100.0
===== =====
*excluding net current assets & fixed interest
Company Country of Risk % of % of
Equity Portfolio Benchmark
Petrobrás - ADR: Brazil
Equity 7.3 4.2
Preference 1.7 4.8
Shares
Banco Bradesco - Brazil
ADR:
Equity 4.7 0.8
Preference 1.8 2.9
Shares
Grupo Financiero Mexico 5.9 3.8
Banorte
Vale - ADS Brazil 5.9 7.6
FEMSA - ADR Mexico 5.2 3.4
B3 Brazil 4.6 2.8
AmBev - ADR Brazil 4.3 2.3
Grupo Aeroportuario Mexico 3.7 0.8
del Pacifico - ADS
Itaú Unibanco - ADR Brazil 3.3 4.5
Gerdau - Preference Brazil 3.3 1.1
shares
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the
Investment Manager noted;
The Company's NAV was up by 5.4% in July, outperforming the benchmark, the MSCI
EM Latin America Index, which returned 3.9% on a net basis over the same period.
All performance figures are in sterling terms with dividends reinvested.1
Latin America had another strong month of performance, gaining +5.1% in July
with all markets posting positive returns. Colombia (+13.7%) was the best
performer on the back of rising Brent crude oil prices and expectations that the
Central Bank will cut rates soon. Peru (+11.6%) was another strong performer,
helped by a rise in copper prices. The remaining regions also posted positive
returns; Chile +5.8%, Brazil +4.9% and Mexico +4.6%.
From a country perspective, Brazil was the biggest contributor to overall
portfolio returns, with strong security selection within the Consumer
Discretionary space. Mexico was another strong contributor, helped by our
overweight in the Financial sector. Exposure to Colombia also contributed on the
margin. The main detractors over the course of July were Peru and Chile.
Gerdau SA, the Brazilian steel manufacturer, was the month's best performing
stock on the back of increased market optimism regarding stimulus measures in
China, which would support globally commodity prices including steel. An off
-benchmark exposure through Brazilian low-income homebuilder, MRV, also
benefitted the portfolio. The company reported record pre-sales numbers, up 48%
year-on-year. This is a highly levered name that should continue to benefit from
the upcoming rate cuts in the country. Pagseguro, the Brazilian payments
acquirer that we initiated a position in last month, also performed well on the
back of the same rate cuts expectations. Elsewhere in the region, an overweight
allocation to Mexican bank, Banorte, also helped returns. While the increase in
net profits in the second quarter of 2023 was below consensus expectations, the
share price was helped by an upward earnings guidance and the announcement of an
extraordinary dividend to be paid at the end of this year. As for detractors to
performance over the course of July, not owning Prio, the Brazilian oil & gas
company, hurt returns following a rebound in the oil price. Our underweight
position in Southern Copper Corporation, the Peruvian copper company, also
weighed on returns as the stock also rallied on hopes for a Chinese policy
stimulus.
We made a few changes to the portfolio in July. We continued to take profits in
names that have performed well in Brazil, primarily through trimming our
exposure to the Brazilian stock exchange, B3, as well taking some profits in
Gerdau. We have reinvested some of the Gerdau proceeds into Vale, on the belief
that this name represents better relative value for a similar commodity exposure
(for example Vale produces iron ore and Gerdau long steel). We exited our
position in Movida, the Brazilian car rental company, and reinvested this into
Vamos, a truck leasing company, also based in Brazil. We believe the stock is
trading at a cheap valuation and expect the company to benefit from the rate
cuts due to company's current leverage levels. We also exited our position in
Cemex, the Mexican cement producer, and used some of the proceeds to top up our
holding in Walmex. The latter has underperformed on cost pressures and
disinflation, but we believe that the negative earnings revisions are bottoming
out. We also added to Grupo Aeropuerto Mexico, the Mexican airport operator, as
the stock has corrected due to continued market concerns around concession
assets in Mexico.
Outlook
Our stance on Brazil remains positive as our thesis of slowing inflation and
sound fiscal policies have partially played out, and we expect a monetary easing
cycle to start imminently. Interest rate cuts are now being priced in by the
market participants and the equity market has rallied strongly on the back of
this. However, while foreign capital has started to flow into Brazil, local
equity flows have continued to be negative year-to-date as the equity market
struggles to compete with a risk-free rate of return of close to 14%. We
therefore believe there is more room for gains over the next 12-18 months. While
we have reduced our positions in Brazil overall following the recent strong
performance, it remains a dominant bet in the portfolio.
We are also positive on the outlook for the Mexican economy as it is a key
beneficiary from the re-shoring of global supply chains. Mexico remains
defensive as both fiscal and the current accounts are in order. While our view
remains positive, we have taken profits after a strong relative performance,
solely because we see even more upside in other Latin American markets such as
Brazil. In addition, we believe that the Mexican economy will be relatively more
sensitive to a potential slowdown in economic activity in the United States in
response to rising interest rates there.
During July, we spent a few days in Argentina to meet with politicians and the
Ministry of Finance in order to get a better understanding of the economic and
political situation ahead of the upcoming elections.
The market has rallied strongly in recent months, Argentina is up 45.5% year-to
-date, as the market is expecting the opposition to win. However, we believe
that the economic situation will remain challenging and difficult, irrespective
of who will form the next government. Since markets have rallied so much already
(leaving less room for errors), we currently have no positions with exposure to
domestic Argentina, the two names we hold are global exporters.
In a global context, we remain optimistic about Latin America as a whole.
Central banks have been proactive in increasing interest rates to help control
inflation, which has started to fall across most countries in the region. We
will likely see central banks begin to lower rates in the near term, which
should support both economic activity and asset prices. In addition to this
normal economic cycle, the whole region is benefitting from being relatively
isolated from global geopolitical conflicts. We believe that this will lead to
both an increase in foreign direct investment and an increase in allocation from
investors across the region.
1Source: BlackRock, as of 31 July 2023.
24 August 2023
ENDS
Latest information is available by typing www.blackrock.com/uk/brla on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV
terminal). Neither the contents of the Manager's website nor the contents of
any website accessible from hyperlinks on the Manager's website (or any other
website) is incorporated into, or forms part of, this announcement.
This information was brought to you by Cision http://news.cision.com
END
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