The
information contained in this release was correct as at
31 July 2024.
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
2024 and
unaudited.
Performance
at month end with net income reinvested
|
One
month
%
|
Three
months
%
|
One
year
%
|
Three
years
%
|
Five
years
%
|
Sterling:
|
|
|
|
|
|
Net
asset value^
|
-1.7
|
-13.7
|
-19.7
|
7.2
|
-15.3
|
Share
price
|
0.5
|
-8.5
|
-16.4
|
10.4
|
-13.5
|
MSCI
EM Latin America
(Net
Return)^^
|
-0.6
|
-10.4
|
-9.1
|
17.3
|
-3.1
|
US
Dollars:
|
|
|
|
|
|
Net
asset value^
|
-0.2
|
-11.5
|
-19.9
|
-1.0
|
-11.1
|
Share
price
|
2.1
|
-6.2
|
-16.6
|
2.0
|
-9.1
|
MSCI
EM Latin America
(Net
Return)^^
|
1.0
|
-8.1
|
-9.3
|
8.3
|
1.6
|
^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:
|
373.97p
|
Net
asset value - including income:
|
376.55p
|
Share
price:
|
343.00p
|
Total
assets#:
|
£125.7m
|
Discount (share
price to cum income NAV):
|
8.9%
|
Average discount*
over the month – cum income:
|
10.2%
|
Net
Gearing at month end**:
|
13.4%
|
Gearing range (as
a % of net assets):
|
0-25%
|
Net
yield##:
|
6.5%
|
Ordinary shares
in issue(excluding 2,181,662 shares held in treasury):
|
29,448,641
|
Ongoing
charges***:
|
1.13%
|
#Total assets
include current year revenue.
##The
yield of 6.5% is calculated based on total dividends declared in
the last 12 months as at the date of this announcement as set out
below (totalling 28.59 cents per
share) and using a share price of 440.57 US cents per share
(equivalent to the sterling price of 343.00
pence per share translated in to US cents at the rate
prevailing at 31 July 2024 of
$1.285 dollars to £1.00).
2023
Q3 Interim dividend of 7.02 cents per
share (Paid on 09 November
2023)
2023
Q4 Interim dividend of 8.05 cents per
share (Paid on 09 February
2024)
2024
Q1 Interim dividend of 7.39 cents per
share (Paid on 13 May
2024)
2024
Q2 Interim dividend of 6.13 cents per
share (To be paid on 13 August
2024)
*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 2023.
Geographic Exposure
|
% of Total Assets
|
% of Equity Portfolio *
|
MSCI EM Latin America Index
|
Brazil
|
58.9
|
58.8
|
59.2
|
Mexico
|
31.2
|
31.2
|
29.2
|
Chile
|
3.6
|
3.6
|
5.9
|
Colombia
|
2.1
|
2.1
|
1.5
|
Argentina
|
2.1
|
2.1
|
0.0
|
Panama
|
1.4
|
1.4
|
0.0
|
Multi-International
|
0.8
|
0.8
|
0.0
|
Peru
|
0.0
|
0.0
|
4.2
|
Net
current Liabilities (inc. fixed interest)
|
-0.1
|
0.0
|
0.0
|
|
-----
|
-----
|
-----
|
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 13.3% of the Company’s net
asset value.
Sector
|
% of Equity Portfolio*
|
% of Benchmark*
|
Financials
|
25.6
|
25.4
|
Industrials
|
15.4
|
10.7
|
Consumer
Staples
|
15.2
|
16.4
|
Materials
|
13.4
|
17.9
|
Consumer
Discretionary
|
10.3
|
1.7
|
Energy
|
9.7
|
13.3
|
Health
Care
|
5.4
|
1.5
|
Real
Estate
|
2.7
|
1.2
|
Information
Technology
|
2.1
|
0.5
|
Communication
Services
|
0.2
|
4.1
|
Utilities
|
0.0
|
7.3
|
|
-----
|
-----
|
Total
|
100.0
|
100.0
|
|
=====
|
=====
|
|
|
|
*excluding
net
current assets & fixed interest
Company
|
Country of
Risk
|
%
of
Equity
Portfolio
|
%
of
Benchmark
|
Petrobrás:
|
Brazil
|
|
|
Equity
|
|
2.0
|
|
Equity
ADR
|
|
5.4
|
4.9
|
Preference Shares
ADR
|
|
2.3
|
5.7
|
Vale
|
Brazil
|
|
|
ADS
|
Brazil
|
7.1
|
|
Equity
|
Brazil
|
0.9
|
6.7
|
Grupo
Financiero Banorte
|
Mexico
|
5.7
|
3.5
|
Walmart de México
y Centroamérica
|
Mexico
|
5.6
|
3.2
|
Banco
Bradesco:
|
Brazil
|
|
|
Equity
ADR
|
|
3.8
|
0.6
|
Preference
Shares
|
|
1.7
|
2.1
|
B3
|
Brazil
|
4.5
|
2.0
|
Grupo
Aeroportuario del Pacifico – ADS
|
Mexico
|
4.2
|
1.1
|
Itaú
Unibanco – ADR
|
Brazil
|
3.4
|
5.3
|
Hapvida
Participacoes
|
Brazil
|
3.2
|
0.6
|
MAG
Silver Corp
|
Mexico
|
3.1
|
0.0
|
|
Commenting
on the markets, Sam Vecht and
Christoph Brinkmann, representing
the Investment Manager noted;
The
Company’s NAV fell by -1.7% in July, underperforming the benchmark,
MSCI Emerging Markets Latin America Index, which returned -0.6% on
a net basis over the same period. All performance figures are in
sterling terms with dividends reinvested.1
Emerging Markets
were flat over the month, underperforming Developed Markets (+1.7%)
despite an improving macroeconomic backdrop. Whilst dollar weakness
and an increasing likelihood of Fed (Federal Reserve) easing in
September were supportive, increasing geopolitical tension and
tariffs post US elections weighed on sentiment. Latin America (+0.9%) outperformed Emerging
Markets in July. Brazil saw a bit
of an inflection, gaining +1.2% over the month as May data was
resilient, however, rising inflation expectations and resilient
growth has resulted in a more hawkish position from the central
bank.
At
the portfolio level, our stock selection in Mexico and an exposure to a non-domestic IT
services company in Argentina were
the key positive contributors to performance during the month. On
the other hand, stock picking in Brazil and Chile impacted performance in June. In
addition, it is worth highlighting that as the investment trust
usually employs gearing, one should expect the portfolio to
underperform during index downturns (and outperform during
upturns).
From
a security lens, Mexican silver miner, MAG Silver, was the best
performing stock. The company reported decent second quarter
results and revised up guidance for the full year 2024. An
off-benchmark holding in IT services company, Globant, continued to
perform well in July and was another significant contributor to
performance. An overweight position in Brazilian truck leasing
company, Vamos, also helped returns as the business is geared into
an economic recovery in Brazil.
Another strong contributor was Mexican airport operator, Grupo
Aeroportuario del Pacífico (GAPB), whose performance in July
rebounded from lows partly driven by the strengthening of the
Mexican Peso.
On
the flipside, a lack of exposure to Brazilian electric equipment
firm, WEG, was the largest detractor to performance over the month
after the company reported strong second quarter margin performance
results. Another detractor during the month was our overweight
position in Becle, a Mexican producer and supplier of alcoholic
beverages. Although the company reported a second quarter margin
beat and better than expected profits, the decline in sales volumes
was perceived negatively by the market. We continue to like the
stock and believe it can outperform on a 12-month horizon. IRB, the
Brazilian reinsurance company also hurt returns in July.
We
made few changes to the portfolio in July. Within Brazil, we reduced our position in beverage
company, Ambev and topped up our holding in hospital chain, Rede
D'or (to align with analyst conviction). We are positive on the
health care sector more broadly as price hikes are above inflation,
thus restoring margins. We also took profits and trimmed our
exposure to Rumo, the Brazilian logistics company, after strong
relative performance. We initiated a holding in StoneCo, a
financial technology and software solutions provider. We see
potential for earnings upgrades on the back of strong payment
volumes in Brazil.
Brazil is the largest portfolio overweight as
of the end of July. Mexico is our
second largest overweight. On the other hand, we remain underweight
to Peru due to its political and
economic uncertainty. The second largest portfolio underweight is
Chile.
Outlook
We
remain optimistic about the outlook for Latin America. Central banks have been
proactive in increasing interest rates to help control inflation,
which has fallen significantly across the region. As such we have
started to see central banks beginning to lower interest rates,
which should support both economic activity and asset prices. In
addition, 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.
Brazil is the highlight of this thesis, with
the central bank having already cut the policy rate considerably.
We still anticipate further reductions, particularly if the U.S.
Federal Reserve starts to reduce its own interest rate. Over the
past two months, investors have become increasingly concerned about
the fiscal trajectory of Brazil.
This was partially sparked by a higher than expected fiscal deficit
in the month of June. After carefully examining the data, we
believe that the market is overreacting. The fiscal expenditure
year-to-date looks artificially high because the government has
decided to accelerate some of the spending that was planned over
the full year into 1H24. We therefore expect better fiscal results
over the next few months, which should help in bringing both the
currency and the interest rates back down.
We
remain positive on the outlook for the Mexican economy as it is a
key beneficiary of the friend-shoring of global supply chains.
Mexico remains defensive as both
fiscal and the current accounts are in order. The outcome of the
presidential elections in early June has created a lot of
volatility for Mexican financial assets, with the peso depreciating
significantly. Investors are concerned that the landslide win of
president-elect Sheinbaum and the Morena party will result in
reduced checks and balances for the government and potentially
detrimental judicial reforms. We have visited Mexico in the week after the election to meet
with investors, business owners and political advisors. Our
conclusion from that trip is that we believe the government will
remain relatively pragmatic and fiscally prudent, as it has been
during AMLO’s (President Andrés Manuel López Obrador)term. We have
therefore used the market correction to add to certain
positions.
We
continue to closely monitor the political and economic situation in
Argentina, after libertarian
Javier Milei unexpectedly won the presidential elections in
November 2023. Milei is facing a very
difficult situation, with inflation around 270% year-on-year, FX
reserves depleted and multiple economic imbalances. To further
gauge sentiment on the ground, we travelled to the country in
January 2024. The trip further
instilled our cautious view on the economic outlook for the
country, and we see no fundamental reasons as to why we would want
to buy this market now. We have become incrementally more cautious
on Argentina over the past month,
as the weakening of the informal exchange rate suggests that
official exchange rate might be overvalued. Therefore we see the
risk of another exchange rate devaluation, which could reignite
inflationary pressures.
The
recent data in the United States
supports our thesis that the US labour market is slowing down,
enabling the Fed to start easing interest rates in September 2024. This should be supportive for
Emerging Market carry countries, including Latin America.
1Source:
BlackRock, as of 31 July
2024.
19 August 2024
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.