BlackRock Latin American Investment Trust Plc - Portfolio Update
PR Newswire
LONDON, United Kingdom, October 17
The information contained in this release was correct as at 30 September 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 30 September 2024 and unaudited.
Performance at month end with net income reinvested
| One | Three | One | Three | Five |
Sterling: |
|
|
|
|
|
Net asset value^ | -3.6 | -2.5 | -14.6 | 14.3 | -6.0 |
Share price | -5.2 | -4.5 | -13.0 | 14.3 | -4.4 |
MSCI EM Latin America | -1.9 | -2.2 | -6.4 | 23.7 | 1.7 |
US Dollars: |
|
|
|
|
|
Net asset value^ | -1.6 | 3.4 | -6.1 | 13.7 | 2.4 |
Share price | -3.3 | 1.3 | -4.5 | 13.7 | 4.2 |
MSCI EM Latin America | 0.1 | 3.7 | 2.8 | 23.0 | 10.7 |
^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: | 368.99p |
Net asset value - including income: | 373.47p |
Share price: | 326.00p |
Total assets#: | £114.1m |
Discount (share price to cum income NAV): | 12.7% |
Average discount* over the month – cum income: | 13.0% |
Net Gearing at month end**: | 3.5% |
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 27.83 cents per share) and using a share price of 437.28 US cents per share (equivalent to the sterling price of 326.00 pence per share translated in to US cents at the rate prevailing at 30 September 2024 of $1.341 dollars to £1.00).
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 (Paid on 08 August 2024)
2024 Q3 Interim dividend of 6.26 cents per share (Payable 08 November 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 | 60.9 | 61.1 | 64.3 |
Mexico | 30.3 | 30.4 | 25.0 |
Chile | 4.0 | 4.1 | 5.5 |
Multi-International | 2.6 | 2.6 | 0.0 |
Argentina | 1.1 | 1.0 | 0.0 |
Colombia | 0.8 | 0.8 | 1.3 |
Peru | 0.0 | 0.0 | 3.9 |
Net current Assets (inc. fixed interest) | 0.3 | 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 3.8% of the Company’s net asset value.
Sector | % of Equity Portfolio* | % of Benchmark* |
Financials | 28.2 | 32.5 |
Materials | 16.3 | 17.3 |
Industrials | 14.8 | 9.8 |
Consumer Staples | 14.2 | 14.1 |
Consumer Discretionary | 10.0 | 1.6 |
Energy | 6.7 | 11.0 |
Health Care | 6.2 | 1.6 |
Real Estate | 2.6 | 1.1 |
Information Technology | 1.0 | 0.5 |
Communication Services | 0.0 | 3.8 |
Utilities | 0.0 | 6.7 |
| ----- | ----- |
Total | 100.0 | 100.0 |
| ===== | ===== |
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*excluding net current assets & fixed interest
| Country of Risk | % of | % of |
Vale | Brazil |
|
|
ADS | Brazil | 8.0 |
|
Equity | Brazil | 1.0 | 6.4 |
Petrobrás: | Brazil |
|
|
Equity |
| 1.1 |
|
Equity ADR |
| 3.2 | 4.3 |
Preference Shares ADR |
| 2.4 | 4.8 |
Grupo Financiero Banorte | Mexico | 6.2 | 3.0 |
Banco Bradesco: | Brazil |
|
|
Equity ADR |
| 3.1 | 0.6 |
Preference Shares |
| 2.2 | 2.3 |
Walmart de México y Centroamérica | Mexico | 5.0 | 2.5 |
Grupo Aeroportuario del Pacifico - ADS | Mexico | 4.6 | 1.1 |
B3 | Brazil | 4.4 | 1.7 |
XP | Brazil | 3.5 | 1.1 |
Hapvida Participacoes | Brazil | 3.4 | 0.6 |
Rumo | Brazil | 3.3 | 0.8 |
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;
The Company’s NAV fell -3.6% in September, underperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -1.9% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.1
Emerging Markets rallied +6.4%, significantly outpacing Developed Markets (+1.7%) in September, driven by an improving macro backdrop across regions. The Federal Reserve (the Fed) began its easing cycle a 50bps cut, signaling that they are comfortable with the outlook for inflation and focusing on the recently weakening labor market data. The performance for Emering Markets in general was further bolstered by stimulus hopes in China towards the end of the month. Latin America lagged Emerging Markets and finished the month flat (-0.1%), driven by negative returns in Brazil (-1.0%) and Colombia (-5.2%). Brazil's Copom (monetary policy committee) moved opposite to the Fed's more dovish action by raising rates 25bps to 10.75% to address the recent increase in inflation expectations on the back of fiscal concerns. This has dampened the effects of US easing and China stimulus. Mexico gained +1.1% in September as the central bank cut rates by 25bps but refrained from providing too much forward guidance on the back of uncertainty surrounding both domestic and external factors impacting growth. It is worth mentioning that AMLO's (Andrés Manuel López Obrador) judicial reform was passed, though attention has now shifted to president-elect Sheinbaum's anticipated inauguration speech and the shape of her policy agenda.
At the portfolio level, an off-benchmark exposure to engineering solutions provider Seatrium, and security selection in Chile, were the key positive contributors to performance. On the other hand, stock picking in Brazil and Mexico hurt us over the month.
From a security lens, an underweight position to NU Holdings was the biggest contributor to performance over the month. The company was added to the MSCI Emerging Markets Latin America Index during the August 2024 index review, but the share price has declined since, likely due to its elevated valuation. Another positive contributor was Seatrium, the Singapore based engineering solutions provider which is building offshore oil equipment for Brazilian state-owned oil producer, Petrobras. Our overweight position to Brazilian retailer, Renner, also helped performance for the second month in a row. Brazilian iron ore producer, Vale, was another strong performer on the back of stimulus hopes from China and recently upgrading their full year production outlook.
On the flipside, an overweight position to Brazilian stock exchange, B3, detracted from performance during the month, primarily due to the recent 25bps rate hike by the Brazilian central bank. Our overweight position in the Brazilian supermarket chain, Assai, was another detractor. As a highly leveraged company, Assai’s performance has been negatively impacted by the rate hike in Brazil. Azzas 2154 also detracted. The Brazilian footwear retailer recently merged with fashion retailer, Soma. As part of the merger, some executives have recently left the firm, which has created some noise among investors. However, we do not see this development as central to the future success of the business.
We made some changes to the portfolio in September. We continued to reduce our overall exposure to Brazil, trimming our holding in Petrobras to reflect concerns around increasing global oil supply amind tepid demand. We rotated some exposure from Bradesco into XP due to relative performance. We exited off-benchmark holding, Copa Airlines, reflecting analyst conviction. We increased our exposure to Mexico, as the macroeconomic setup still looks favourable with a good external balance and high carry, by re-initiating a position in convenience store operator, FEMSA.
Mexico is the largest portfolio overweight as at the end of September. Multi-country appears as our second largest overweight due to an off-benchmark holding in engineering solutions provider, Seatrium. On the other hand, the largest underweight is Panama. The second largest portfolio underweight is Peru due to its political and economic uncertainty.
Outlook
We remain optimistic about the outlook for Latin America. The start of the Fed's easing cycle should be supportive for Latin America, particularly amid reassurance that the 50bps cut was to pre-emptively manage slowing growth and labour dynamics. Whilst the September index performance has been mixed, we maintain conviction that fundamentals remain robust and that stronger growth, now coupled with greater policy flexibility, should result in reduced risk premia. 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.
In Brazil, whilst, contra to our initial thesis, the central bank embarked on a tightening phase to get ahead of persistent inflation, we are still excited about the bottom-up opportunities within the market as earnings have been strong across sectors. Real rates remain high and if policy makers are able to stem investor concerns surrounding recent fiscal slippage, we would expect to see a reversal in monetary policy that would drive the top down support we have patiently been waiting for. We have trimmed risk at the margin, particularly in the more rate sensitive exposures, and would look to add as rates peak once again.
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. The passing of the controversial judicial reform in early September is a good example of this. We are certainly concerned about the implications of the reform for judicial independence. 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.
1Source: BlackRock, as of 30 September 2024.
17 October 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.