REG-BlackRock Latin American Investment Trust Plc: Portfolio Update
21/06/2024 18:15
The information contained in this release was correct as at 31 May 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 May 2024 and unaudited.
Performance at month end with net income reinvested
One Three One Three Five
month months year years years
% % % % %
Sterling:
Net asset value^ -4.4 -7.4 3.1 18.4 3.7
Share price -3.2 -5.4 5.1 19.2 8.3
MSCI EM Latin America -4.7 -6.2 9.6 25.6 12.7
(Net Return)^^
US Dollars:
Net asset value^ -2.8 -6.8 5.8 6.3 4.9
Share price -1.5 -4.8 7.9 7.1 9.4
MSCI EM Latin America -3.1 -5.6 12.6 12.5 13.8
(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: 419.48p
Net asset value - including income: 422.39p
Share price: 368.00p
Total assets#: £137.2m
Discount (share price to cum income NAV): 12.9%
Average discount* over the month – cum income: 13.4%
Net Gearing at month end**: 11.0%
Gearing range (as a % of net assets): 0-25%
Net yield##: 6.4%
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 6.4% is calculated based on total dividends declared in the
last 12 months as at the date of this announcement as set out below (totalling
30.00 cents per share) and using a share price of 468.54 US cents per share
(equivalent to the sterling price of 368.00 pence per share translated in to
US cents at the rate prevailing at 31 May 2024 of $1.273 dollars to £1.00).
2023 Q2 Interim dividend of 7.54 cents per share (Paid on 11 August 2023)
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)
*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 58.2 57.8 57.4
Mexico 30.8 30.6 30.9
Chile 4.0 4.0 6.0
Colombia 2.6 2.6 1.4
Multi-Country 1.9 1.8 0.0
Argentina 1.8 1.8 0.0
Panama 1.4 1.4 0.0
Peru 0.0 0.0 4.3
Net current Liabilities (inc. fixed interest) -0.7 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 10.3% of the Company’s net asset value.
Sector % of Equity Portfolio* % of Benchmark*
Financials 24.7 25.6
Consumer Staples 18.1 15.9
Industrials 14.1 10.5
Materials 13.9 18.6
Consumer Discretionary 10.4 1.8
Energy 10.0 13.6
Health Care 4.1 1.5
Real Estate 2.7 1.2
Information Technology 1.8 0.6
Communication Services 0.2 4.2
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: Brazil
Equity 2.0
Equity ADR 5.6 4.9
Preference Shares ADR 2.4 6.0
Vale – ADS Brazil 7.5 7.0
Walmart de México y Centroamérica Mexico 5.8 3.3
Grupo Financiero Banorte Mexico 5.8 4.2
Banco Bradesco: Brazil
Equity ADR 3.9 0.6
Preference Shares 1.7 2.2
Grupo Aeroportuario del Pacifico – ADS Mexico 4.5 1.2
B3 Brazil 4.4 2.0
AmBev:
Equity Brazil 0.7
Equity ADR Brazil 2.6 1.8
MAG Silver Corp Mexico 3.1 0.0
Itaú Unibanco – ADR Brazil 3.1 4.9
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the
Investment Manager noted;
The Company’s NAV fell -4.4% in May, outperforming the benchmark, MSCI
Emerging Markets Latin America Index, which returned -4.7% on a net basis over
the same period. All performance figures are in sterling terms with dividends
reinvested.(1)
Emerging Markets posted flattish returns (+0.6%) in May, significantly
underperforming Developed Markets (+4.5%). Latin America (-3.1%) lagged all
other regions on the Federal Reserve (the Fed) re-pricing overhang. Brazil
was down -5.0% as the country grappled with concerns around severe floods
affecting both inflation and fiscal stability. Mexico declined -2.5% amid
pre-election nervousness although the Mexican Peso remained stable. On the
other hand, Argentina, Colombia and Peru all posted positive returns. Rate
cuts in the latter two countries were particularly well received.
At the portfolio level, our exposure to precious metals stocks in Mexico and
Ecuador continue to be the key positive contributors to performance. On the
other hand, having no exposure to Peru hurt performance over the month. So did
our stock picking in Chile.
From a security lens, Mexican silver miner, Mag Silver, was the largest
contributor, for the third month in a row. The stock was supported by an
increase in silver prices, as the commodity continues to rally despite a more
hawkish Federal Reserve. An underweight position to Brazilian oil and gas
company, Petrobras, also helped performance as the stock declined following
news of the dismissal of the company's CEO. An overweight position in Mexican
airport operator, Grupo Aeroportuario del Pacífico (GAPB), was another
contributor, for the second month in a row after delivering decent traffic
numbers. Our overweight position in Brazilian integrated healthcare operator,
Hapvida, also contributed positively to performance. The stock rallied ahead
of their Q1 earnings call which confirmed robust earnings growth driven by new
customer additions and favourable industry trends.
On the flipside, IRB, the Brazilian reinsurance company was the biggest
detractor for performance in May, reversing gains seen in April. An overweight
position in Brazilian Retailer, Lojas Renner, was another detractor during the
month as their latest earnings report surprised to the downside. The company
has struggled to stay competitive against cheap foreign imports while sticky
rate policy continues to be a broader burden to Brazil's equity markets.
Brazilian bank, Bradesco, also impacted performance over the month on the back
of a deteriorating net interest income outlook.
We made few changes to the portfolio in May. We exited Chilean pulp and paper
company, Empresas CMPC, on the back of relative performance. Pulp prices went
up on supply disruptions and we believe the overall market should become more
oversupplied going forward. We added to our holding in Mexican bank, Banorte,
on the back of weakness going into the Mexican elections. We also initiated a
position in Mexican highway operator, Pinfra. This is a well-run, conservative
business that trades on low multiples.
Brazil is the largest portfolio overweight as of May end. Mexico is our second
largest overweight. On the other hand, we remain underweight in 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 showcase of this thesis - with the central bank cutting the
policy rate considerably. We anticipate further reductions, particularly if
the Federal Reserve ceases its own rate hikes. The government’s fiscal
framework being more orthodox than market expectations has helped to reduce
uncertainty regarding the fiscal outlook and was key for confidence. We expect
further upside to the equity market in the next 12-18 months as local capital
starts flowing into the market.
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 term. We have therefore used the market correction to add to certain
positions.
In light of this, we have been taking advantage of the recent weakness to add
to the country, as we believe the market reaction to the election outcome is
unwarranted.
We continue to closely monitor the political and economic situation in
Argentina, after libertarian Javier Milei unexpectedly won the presidential
elections in November. Milei is facing a very difficult situation, with
inflation around 290% year-on-year, FX reserves depleted and multiple economic
imbalances. To further gauge sentiment on the ground, we travelled to the
country in January. 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 acknowledge the strengths of the data in the United States, but we believe
that, ultimately, the domestic economic outlook in the Latin American
countries will be the key driver of local interest rates. We therefore
maintain conviction in the funds positioning in rate-sensitive domestic
stocks. In addition, our view of a softer US labor market and further
disinflation seems to be playing out, as evidenced by the recent rise in
jobless claims and the relatively benign May inflation data. As a result, the
pressure from higher rates in the US is easing.
1Source: BlackRock, as of 31 May 2024.
21 June 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.
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