BlackRock Latin American Investment Trust Plc - Portfolio Update
PR Newswire
LONDON, United Kingdom, November 26
The information contained in this release was correct as at 31 October 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 October 2024 and unaudited.
Performance at month end with net income reinvested
| One | Three | One | Three | Five |
Sterling: |
|
|
|
|
|
Net asset value^ | -2.0 | -2.8 | -9.9 | 22.7 | -8.8 |
Share price | -3.0 | -7.8 | -8.0 | 17.1 | -7.5 |
MSCI EM Latin America | -1.0 | -2.7 | -3.3 | 31.4 | 1.2 |
US Dollars: |
|
|
|
|
|
Net asset value^ | -6.1 | -2.7 | -4.6 | 15.1 | -9.4 |
Share price | -7.0 | -7.7 | -2.5 | 9.8 | -8.1 |
MSCI EM Latin America | -5.1 | -2.6 | 2.4 | 23.3 | 0.5 |
^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: | 361.19p |
Net asset value - including income: | 361.40p |
Share price: | 312.00p |
Total assets#: | £116.3m |
Discount (share price to cum income NAV): | 13.8% |
Average discount* over the month - cum income: | 14.4% |
Net Gearing at month end**: | 9.9% |
Gearing range (as a % of net assets): | 0-25% |
Net yield##: | 7.0% |
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 7.0% 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 400.48 US cents per share (equivalent to the sterling price of 312.00 pence per share translated in to US cents at the rate prevailing at 31 October 2024 of $1.286 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 | 62.7 | 62.3 | 64.1 |
Mexico | 31.9 | 31.7 | 25.1 |
Chile | 3.4 | 3.4 | 5.4 |
Multi-International | 1.5 | 1.5 | 0.0 |
Argentina | 1.1 | 1.1 | 0.0 |
Colombia | 0.0 | 0.0 | 1.3 |
Peru | 0.0 | 0.0 | 4.1 |
Net current Liabilities (inc. fixed interest) | -0.6 | 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 9.2% of the Company's net asset value.
Sector | % of Equity Portfolio* | % of Benchmark* |
Financials | 26.6 | 33.4 |
Materials | 18.4 | 17.0 |
Consumer Staples | 13.4 | 14.0 |
Industrials | 12.5 | 9.9 |
Consumer Discretionary | 9.8 | 1.6 |
Energy | 8.2 | 10.8 |
Health Care | 7.0 | 1.5 |
Real Estate | 2.6 | 1.1 |
Information Technology | 1.1 | 0.5 |
Utilities | 0.4 | 6.5 |
Communication Services | 0.0 | 3.7 |
| ----- | ----- |
Total | 100.0 | 100.0 |
| ===== | ===== |
|
|
|
*excluding net current assets & fixed interest
| Country of Risk | % of | % of |
Vale: | Brazil |
|
|
ADS |
| 7.5 |
|
Equity |
| 1.2 | 6.2 |
Petrobrás: | Brazil |
|
|
Equity |
| 1.1 |
|
Equity ADR |
| 4.8 | 4.3 |
Preference Shares ADR |
| 2.3 | 4.7 |
Grupo Financiero Banorte | Mexico | 5.9 | 3.1 |
Banco Bradesco: | Brazil |
|
|
Equity ADR |
| 3.2 | 0.6 |
Preference Shares |
| 2.1 | 2.2 |
Walmart de México y Centroamérica | Mexico | 5.0 | 2.4 |
B3 | Brazil | 4.1 | 1.7 |
Hapvida Participacoes | Brazil | 3.8 | 0.5 |
XP | Brazil | 3.5 | 1.1 |
Rumo | Brazil | 3.5 | 0.8 |
Rede D'or Sao Luiz | Brazil | 3.2 | 0.7 |
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;
The Company's NAV fell -2.0% in October, underperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -1.0% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.
Emerging markets fell by 4.4% in October, caught in the crossfire of a global equity sell-off. Emerging markets underperformed developed markets with the MSCI Developed Markets Index falling by 2.0%. Latin America finished the month down (-5.1%), driven by negative returns in Brazil
(-5.5%) and Mexico (-5.0%). Brazil continues to struggle to shake off concerns on fiscal slippage especially against a background of higher growth and elevated inflation. Mexico suffered as a result of higher US yields meaning a weaker MXN while predictions of a Trump win weighed on the market too.
At the portfolio level, security selection in Mexico and off-benchmark exposure to engineering solutions provider Seatrium, were the key positive contributors to performance. On the other hand, stock picking in Brazil and having no exposure to Peru hurt performance over the month.
From a security lens, the Mexican silver miner, MAG Silver, was the best performing stock over the month, helped by stronger silver prices and strong operational performance at their main mine. Another strong contributor was Mexican airport operator Grupo Aeroportuario del Pacífico (GAPB). While their third-quarter results were a miss, the company is still on track to beat their full year 2024 guidance and we continue to like the name. Another positive contributor was Seatrium, the Singapore based engineering solutions provider, which is building offshore oil equipment for Brazilian state-owned oil producer Petrobras. The company did well on the back of strong third-quarter results. Banorte, the Mexican bank, also helped performance in October with third-quarter results showing net income up 7% year over year.
On the flipside, an underweight position to Brazilian digital banking platform provider, NU Holdings, was the largest detractor. Being listed in the United States, the stock has shown a stronger correlation to U.S. equity markets, despite its operations being largely in Brazil and Mexico. Another detractor was Brazilian healthcare operator Hapvida. The health care sector at large has seen an increased judicialization. As a result, investors have become concerned that Hapvida will need to increase provisions for court cases. We believe the market is overreacting and continue to own the stock. Becle, a Mexican producer and supplier of alcoholic beverages, was another detractor. The stock has underperformed on volume concerns, but we believe the stock will see a significant increase in margins on the back of lower agave prices.
We made some changes to the portfolio in October. We took profits and trimmed our exposure to MAG Silver and also took some profits on Banorte. We exited gold miner Franco-Nevada based on the view that the restart of the Cobre Panama copper mine will take some time. We took advantage of recent weakness to add to Brazilian logistics company, Rumo, as operations are doing well. We re-initiated a position in Mexican cement producer, Cemex, as it has de-levered and is trading on a cheap multiple.
Mexico is the largest portfolio overweight as at the end of October. Brazil is our second largest overweight. On the other hand, the largest underweight was Peru. The second largest portfolio underweight was Chile.
Outlook
We remain optimistic about the outlook for Latin America. The start of the Federal Reserve's easing cycle should be supportive for Latin America. 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 (Andrés Manuel López Obrador) term. We have therefore used the market correction to add to certain positions.
1Source: BlackRock, as of 31 October 2024.
26 November 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.
