BlackRock Latin American Investment Trust NAV returned 10.7% in October

BlackRock

BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.

All information is at 31 October 2022 and unaudited.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla 

Performance at month end with net income reinvested 

One
month
%
Three
months
%
One
 year
%
Three
years
%
Five
years
%
Sterling:
Net asset value^7.220.038.63.012.0
Share price6.813.730.32.99.8
MSCI EM Latin America
(Net Return)^^
6.315.238.26.414.8
US Dollars:
Net asset value^10.613.516.4-8.4-2.9
Share price10.17.69.4-8.4-4.9
MSCI EM Latin America
(Net Return)^^
9.79.016.1-5.3-0.5

^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:445.52p
Net asset value – including income:461.57p
Share price:398.00p
Total assets#:£145.4m
Discount (share price to cum income NAV):13.8%
Average discount* over the month – cum income:14.9%
Net gearing at month end**:7.7%
Gearing range (as a % of net assets):0-25%
Net yield##:5.6%
Ordinary shares in issue(excluding 2,181,662 shares held in treasury):29,448,641
Ongoing charges***:1.1%

#Total assets include current year revenue.
##The yield of 5.6% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 25.79 cents per share) and using a share price of 458.24 US cents per share (equivalent to the sterling price of 398.00 pence per share translated in to US cents at the rate prevailing at 31 October 2022 of $1.1514 dollars to £1.00).

2021 Q4 Final dividend of 6.21 cents per share (paid on 08 February 2022).
2022 Q1 Interim dividend of 7.76 cents per share (paid on 16 May 2022).
2022 Q2 Interim dividend of 5.74 cents per share (paid on 12 August 2022).
2022 Q3 Interim dividend of 6.08 cents per share (payable on 09 November 2022).

*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 2021.

Geographic Exposure% of Total Assets% of Equity Portfolio *MSCI EM Latin America Index
Brazil63.362.963.5
Mexico26.025.826.0
Chile3.53.46.1
Argentina3.03.00.0
Peru2.72.72.8
Panama2.22.20.0
Colombia0.00.01.6
Net current Liabilities (inc. fixed interest)-0.70.00.0
—–—–—–
Total100.0100.0100.0
===============

^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 6.9% of the Company’s net asset value.

Sector% of Equity Portfolio*% of Benchmark*
Financials31.026.1
Materials17.519.8
Consumer Staples15.914.7
Energy9.611.8
Industrials7.68.5
Real Estate6.10.6
Health Care5.22.4
Consumer Discretionary3.42.8
Communication Services2.26.5
Information Technology1.50.6
Utilities0.06.2
—–—–
Total100.0100.0
==========

*excluding net current assets & fixed interest


Company
Country of Risk% of
Equity Portfolio
% of
Benchmark
Petrobrás – ADR:Brazil
   Equity4.94.2
   Preference Shares3.24.8
Itaú Unibanco – ADRBrazil6.85.0
Vale – ADSBrazil6.89.1
Banco Bradesco – ADRBrazil6.34.5
FEMSA – ADRMexico5.82.5
AmBev – ADRBrazil5.62.6
B3Brazil5.33.1
Grupo Financiero BanorteMexico5.13.7
Hapvida ParticipacoesBrazil3.81.2
Suzano Papel e CeluloseBrazil3.11.3

Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;

For the month of October 2022, the Company’s NAV returned 10.7%1 with the share price moving 5.3%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 9.7%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).

Security selection in Mexico contributed most to relative performance over the month while security selection in Brazil detracted from performance. Our underweight position in Brazilian mining company, Vale, was the top contributor to the portfolio as the stock has underperformed due to higher costs in the base metals division. Our overweight position in Mexican bank, Banorte, also benefitted the portfolio as the company reported increases in Q3 earnings. On the other hand, our off-benchmark position in Brazilian construction company, MRV Engenharia, detracted most from relative performance as the company reported lower than expected launches and presales. Not holding the Brazilian engineering company, Weg, also detracted from performance as the company has recently performed well on the back of strong demand and a recent broker upgrade.

Over the month we added to Brazilian brewing company, Ambev, as the company’s outlook is improving. We reduced exposure to Brazilian pulp and paper company, Suzano, as we think the company has reached peak pulp profitability. We sold our holding of Brazilian logistics company, Santos Brasil, due to lowered analyst conviction in the stock.

The portfolio ended the month being overweight Argentina, Brazil, Mexico and Panama, while being underweight Chile and Colombia. At the sector level, we are overweight financials and real estate, while we are underweight communication services and utilities.

The fundamentals around Latin American equities have steadily improved from a challenging 2021 as investors seemingly learn to live with the region’s political risk. Latin American currency remains relatively cheap at current levels and the combination of rising interest rates and low valuations has been attracting investors to increase regional exposure. Latin American central banks were the first to raise rates last year and policy makers in the region have surprised markets with steep hikes this year. For example, Brazilian policy makers have increased borrowing costs to the highest levels in almost five years. As a result, Latin America is considered by many to be ahead of the curve from a monetary policy standpoint, relative to developed markets.  In terms of positioning, we have been favoring domestic stocks that are more sensitive to interest rates in Brazil on the view that the nation’s next president, leftist former President Lula, is likely to implement relatively orthodox macro policies and the Brazilian Central Bank might start an easing cycle in 2023. Although the results of the Q4 Brazilian presidential election are creating plentiful market noise, global investors seem to be ready to put money to work in local Latin American equity markets as other Emerging Market nations such as China and Russia grapple with their own issues.  We would argue that for multiple reasons Latin America would seem well-positioned at present.  These include:  i) geographic and economic insulation from the recent global challenges; ii) broad exposure to commodities; iii) cheap currencies; iv) attractive valuations; and most importantly v) proactive monetary policy.

1Source: BlackRock, as of 31 October 2022.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla

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