REG-BlackRock Latin American Investment Trust Plc: Portfolio Update - Correction
03/04/2024 16:45
Performance figures relating to the performance of developed markets and latin
american markets has been adjusted slightly and defined as provided on a US
Dollar basis. These changes affect the second paragraph of the portfolio
manager's commentary only. All other information remain unchanged.
The information contained in this release was correct as at 29 February
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 29 February 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^ -0.3 -0.8 18.9 43.1 13.5
Share price -2.9 0.7 14.2 35.9 16.4
MSCI EM Latin America 0.5 3.0 17.1 54.2 21.5
(Net Return)^^
US Dollars:
Net asset value^ -0.9 -0.9 24.2 29.5 8.0
Share price -3.6 0.6 19.3 23.0 10.7
MSCI EM Latin America -0.2 2.9 22.4 39.5 15.5
(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: 457.87p
Net asset value - including income: 461.79p
Share price: 395.00p
Total assets#: £142.7m
Discount (share price to cum income NAV): 14.5%
Average discount* over the month – cum income: 12.5%
Net Gearing at month end**: 5.8%
Gearing range (as a % of net assets): 0-25%
Net yield##: 5.8%
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 5.8% is calculated based on total dividends declared in the
last 12 months as at the date of this announcement as set out below (totalling
28.82 cents per share) and using a share price of 499.66 US cents per share
(equivalent to the sterling price of 395.00 pence per share translated in to
US cents at the rate prevailing at 29 February 2024 of $1.265 dollars to
£1.00).
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 (Paid on 11 August 2023)
2023 Q3 Interim dividend of 7.02 cents per share (Paid on 09 November 2023)
2024 Q4 Interim dividend of 8.05 cents per share (Paid on 09 February 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 60.0 59.5 60.8
Mexico 27.0 26.7 29.2
Chile 5.6 5.5 5.4
Argentina 2.6 2.6 0.0
Colombia 2.5 2.5 1.2
Panama 1.6 1.6 0.0
Multi-Country 1.6 1.6 0.0
Peru 0.0 0.0 3.4
Net current Liabilities (inc. fixed interest) -0.9 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 4.9% of the Company’s net asset value.
Sector % of Equity Portfolio* % of Benchmark*
Financials 22.6 26.3
Consumer Staples 18.2 16.0
Materials 16.3 17.2
Industrials 11.7 10.2
Consumer Discretionary 10.9 2.0
Energy 10.3 13.8
Health Care 3.8 1.4
Real Estate 2.6 1.3
Communication Services 2.1 4.2
Information Technology 1.5 0.5
Utilites 0.0 7.1
----- -----
Total 100.0 100.0
===== =====
*excluding net current assets & fixed interest
Company Country of Risk % of % of
Equity Portfolio Benchmark
Petrobrás: Brazil
Equity 2.2
Equity ADR 3.5 4.9
Preference Shares ADR 3.5 6.1
Vale – ADS Brazil 8.9 7.2
Walmart de México y Centroamérica Mexico 5.9 3.3
Banco Bradesco: Brazil
Equity ADR 3.8 0.6
Preference Shares 1.9 2.3
B3 Brazil 4.1 2.4
AmBev:
Equity Brazil 0.8
Equity ADR Brazil 3.1 1.9
FEMSA - ADR Mexico 3.6 3.8
Grupo Aeroportuario del Pacifico – ADS Mexico 3.6 0.9
Itaú Unibanco – ADR Brazil 3.4 5.2
Grupo Financiero Banorte Mexico 3.4 4.2
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the
Investment Manager noted;
The Company’s NAV fell -0.3% in February, underperforming the benchmark,
MSCI EM Latin America Index, which returned 0.5% on a net basis over the same
period. All performance figures are in sterling terms with dividends
reinvested.1
Emerging markets more broadly almost fully recovered from January weakness,
gaining +4.8% in February and broke their four-month streak to marginally
outperform developed markets (+4.2%) by +0.6%. Latin American markets lagged
the rest of emerging markets, finishing the month flat (-0.2%). Mexico (-2.8%)
and Argentina (-2.8%) led declines, whilst Peru (+7.2%) and Chile (+5.6%) were
at the top of the table. (All returns in this paragraph are on a US Dollar
basis.)
At the portfolio level, our overweight and stock selection within the Consumer
Staples space in Mexico was the key contributor to performance, alongside our
Chilean Industrials exposure. On the other hand, stock selection in the
Brazilian Financials sector hurt relative returns. Having no exposure to Peru
was another drag over the period.
From a security lens, Chilean lithium producer, SQM, was the largest
contributor over the month, reversing some of the January losses. Alpargatas,
a Brazilian footwear manufacturer, was another strong performer after 4Q23
results indicate that their inventories continue to improve. An overweight
position in Becle, a Mexican producer and supplier of alcoholic beverages most
famously known for their high-end tequila brand Jose Cuervo, also helped
returns. The company delivered strong 4Q results, beating consensus by 15%.
The portfolio’s performance was also supported by an off-benchmark exposure
in Argentina through steel pipe manufacturer, Tenaris. The stock rose
following a 4Q (EBITDA) beat, where results had been helped by an increase in
shipment to the Middle East and for offshore pipeline projects.
On the flipside, Banco Bradesco was the worst performing stock over the month.
The stock sold off after an earnings miss amid high credit costs, and weaker
2024 guidance. While it has taken longer than expected, we continue to believe
they will benefit from falling rates in Brazil. A lack of exposure to Peruvian
bank, Credicorp, was another detractor as the company's FY24 guidance was
better than consensus. While not having a holding in Brazilian electric
equipment firm, WEG, was one of the top contributors in January, this hurt
returns in February. The company reported better-than-expected results due to
a one-off tax-gain. We maintain our cautious stance on the name as we see
sequential margin deterioration going forward.
We made few changes to the portfolio in February. We continued to reduce our
exposure to Mexican convenience store operator FEMSA, as our investment case
has largely played out and as we see margin pressure at their core convenience
store Oxxo. We traded against relative performance by trimming our exposure to
Brazilian bank Itau and used the proceeds to top up our holding in Bradesco
following poor results. We think the performance and valuation differential
between the two banks is too large. We re-initiated a position in Brazilian
investment management platform, XP Inc, as the company has strong operating
leverage to falling interest rates.
Argentina continues to the be largest portfolio overweight, driven by two
off-benchmark holdings (with no exposure to domestic Argentina). Panama
appears as our second largest overweight, due to our off-benchmark holding in
Copa Airlines. On the other hand, we remain underweight in Peru due to its
political and economic uncertainty. The second largest portfolio underweight
is Mexico.
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. 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. We also note that the Mexican economy will be relatively more
sensitive to a potential slowdown in economic activity in the United States.
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 above 200% 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.
1Source: BlackRock, as of 29 February 2024.
2 April 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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