REG-BlackRock Latin American Investment Trust Plc: Portfolio Update
25/04/2024 14:00
The information contained in this release was correct as at 31 March 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 March 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^ 1.4 -6.2 22.6 38.1 16.9
Share price 1.5 -9.0 20.2 32.5 20.0
MSCI EM Latin America 1.2 -3.1 20.0 47.2 23.6
(Net Return)^^
US Dollars:
Net asset value^ 1.2 -7.0 25.3 26.4 13.4
Share price 1.4 -9.8 22.7 21.4 16.4
MSCI EM Latin America 1.0 -4.0 22.6 34.8 19.8
(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: 465.65p
Net asset value - including income: 468.08p
Share price: 401.00p
Total assets#: £144.1m
Discount (share price to cum income NAV): 14.3%
Average discount* over the month – cum income: 13.4%
Net Gearing at month end**: 4.5%
Gearing range (as a % of net assets): 0-25%
Net yield##: 5.9%
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 5.9% 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 506.56 US cents per share
(equivalent to the sterling price of 401.00 pence per share translated in to
US cents at the rate prevailing at 31 March 2024 of $1.263 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 (To be paid on 16 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 58.2 59.1
Mexico 27.8 27.8 30.5
Chile 5.7 5.7 5.4
Colombia 2.7 2.7 1.3
Multi-Country 2.1 2.1 0.0
Argentina 1.8 1.8 0.0
Panama 1.7 1.7 0.0
Peru 0.0 0.0 3.7
Net current Liabilities (inc. fixed interest) -0.0 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 4.5% of the Company’s net asset value.
Sector % of Equity Portfolio* % of Benchmark*
Financials 22.1 26.5
Consumer Staples 18.8 16.3
Materials 17.2 17.8
Consumer Discretionary 12.5 2.0
Industrials 12.0 10.3
Energy 7.5 13.0
Health Care 3.8 1.4
Real Estate 2.3 1.3
Communication Services 2.0 4.1
Information Technology 1.8 0.4
Utilites 0.0 6.9
----- -----
Total 100.0 100.0
===== =====
*excluding net current assets & fixed interest
Company Country of Risk % of % of
Equity Portfolio Benchmark
Vale – ADS Brazil 8.1 6.5
Petrobrás: Brazil
Equity 2.0
Equity ADR 3.2 4.5
Preference Shares ADR 2.3 5.6
Walmart de México y Centroamérica Mexico 6.9 3.3
Banco Bradesco: Brazil
Equity ADR 3.9 0.6
Preference Shares 1.9 2.4
AmBev:
Equity Brazil 0.7
Equity ADR Brazil 3.5 1.8
Grupo Aeroportuario del Pacifico – ADS Mexico 3.9 0.9
B3 Brazil 3.8 2.1
Lojas Renner Brazil 3.5 0.5
Itaú Unibanco – ADR Brazil 3.5 5.3
Grupo Financiero Banorte Mexico 3.5 4.3
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the
Investment Manager noted;
The Company’s NAV rose +1.4% in March, outperforming the benchmark, MSCI EM
Latin America Index, which returned 1.2% on a net basis over the same period.
All performance figures are in sterling terms with dividends reinvested.
Emerging markets more broadly continued their strong run from February,
gaining +2.5% in March. Latin America finished the month up +1.1%. Brazil
(-1.8%) was the major driver of muted returns on softer economic data.
However, all the other Latin American countries posted positive returns.
Argentina was the strongest performer(+12.7%), followed by Colombia (+10.6%),
Peru (+10.4%), Mexico (+5.4%) and Chile (+2.1%).
At the portfolio level, our off-benchmark holding in an Ecuadorian gold miner
was the key contributor to performance, alongside our Chilean Materials
exposure. On the other hand, having no exposure to Peru hurt relative returns.
Stock selection in the Brazilian Materials sector also hurt returns.
From a security lens, Mexican silver miner, Mag Silver, was the largest
contributor over the month followed by Ecuadorian gold miner, Lundin Gold.
Both stocks have been propelled higher by rising gold and silver prices.
Overweight in Mexican airport operator Grupo Aeroportuario del Pacífico
(GAPB) also helped returns on the back of better-than-expected passenger
traffic numbers along with a strong Mexican Peso. Lojas Renner, a Brazilian
apparel chain, also contributed to performance as the market is starting to
anticipate a turnaround in sales and consumer credit (due to declining
interest rates).
On the flipside, not owning Peruvian miner Southern Copper weighed on
performance. The Peruvian market has done well and the stock has also been
supported by strong copper prices. We currently have no holdings in the
country and maintain our cautious stance due to the political and economic
uncertainty. No exposure to Mexican cement producer, Cemex, also weighed on
returns. While Alpargatas, a Brazilian footwear manufacturer, was among the
top contributors in February, the stock pulled back in March, detracting from
portfolio performance.
We made some changes to the portfolio in March. In Argentina, we exited steel
pipe manufacturer, Tenaris as our investment case has played out. We also
further diversified our bets by adding to IT services company Globant. We
added to our holding in Brazilian retailer Lojas Renner as our conviction in
our thesis is increasing. We are starting to see tentative signs that the
credit book is finally turning around.
We reduced our overweight position in Cuervo, a Mexican producer and supplier
of alcoholic beverages most famously known for their high-end tequila brand
Jose Cuervo, to take profits. We also switched some of our position in FEMSA
into Walmex, as we are concerned the former will deliver weak 1Q24 results on
the back of labor cost pressure in Mexico.
Multi-Country appears as our largest overweight, due to our holding in Lundin
Gold, a Canadian based mining company with operations in Ecuador. Argentina is
our second largest portfolio overweight, driven by one off-benchmark holding
(with no exposure to domestic Argentina). 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 250% 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 Company’s positioning in rate-sensitive domestic
stocks. In addition to that, after three months of very strong labor market
data and higher-than-expected inflation data in the United States, we believe
there is a high probability that both measures will soften going forward. This
view is predicated on leading indicators such as hiring intentions and
high-frequency pricing data. If this view would prove to be correct, there
should be less pressure from rising rates in the United States.
1Source: BlackRock, as of 31 March 2024.
25 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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