BlackRock Latin American Investment Trust NAV returned 15% with the share price moving 17.2%

BlackRock

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

All information is at 31 March 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^15.030.322.84.014.3
Share price17.231.627.315.227.7
MSCI EM Latin America
(Net Return)^^
15.230.929.58.716.0
US Dollars:
Net asset value^12.926.617.25.120.3
Share price15.027.821.516.534.4
MSCI EM Latin America
(Net Return)^^
13.127.323.59.822.2

^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:468.44p
Net asset value – including income:471.63p
Share price:442.00p
Total assets#:£203.9m
Discount (share price to cum income NAV):6.3%
Average discount* over the month – cum income:8.8%
Net gearing at month end**:11.5%
Gearing range (as a % of net assets):0-25%
Net yield##:4.9%
Ordinary shares in issue(excluding 2,181,662 shares held in treasury):39,259,620
Ongoing charges***:1.1%

#Total assets include current year revenue.
##The yield of 4.9% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 28.35 cents per share) and using a share price of 581.96 US cents per share (equivalent to the sterling price of 442.00 pence per share translated in to US cents at the rate prevailing at 31 March 2022 of $1.3167 dollars to £1.00).

2021 Q2 interim dividend of 7.82 cents per share (paid on 6 August 2021).
2021 Q3 interim dividend of 6.56 cents per share (paid on 8 November 2021).
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 (payable on 16 May 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.
*** Calculated as a percentage of average net assets and using expenses, excluding interest costs for the year ended 31 December 2021.

Geographic
Exposure
% of
Total Assets
% of Equity Portfolio *MSCI EM Latin America Index
Brazil64.463.663.6
Mexico25.325.025.4
Chile5.15.15.6
Peru2.82.83.0
Argentina1.91.90.0
Panama1.71.60.0
Colombia0.00.02.4
Net current Liabilites (inc. fixed interest)-1.20.00.0
—–—–—–
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 10.1% of the Company’s net asset value.

Sector% of Equity Portfolio*% of Benchmark*
Financials27.524.4
Materials21.624.1
Consumer Staples12.714.1
Industrials8.16.7
Communication Services8.07.3
Energy7.111.9
Health Care5.62.6
Consumer Discretionary3.03.6
Real Estate3.00.6
Information Technology1.90.6
Utilities1.54.1
—–—–
Total100.0100.0
==========

*excluding net current liabilities & fixed interest


Company
Country of Risk% of
Equity Portfolio
% of
Benchmark
Vale – ADSBrazil8.512.3
Petrobrás – ADR:Brazil
   Equity4.04.1
   Preference Shares3.15.0
Banco Bradesco – ADRBrazil5.64.2
Itaú Unibanco – ADRBrazil5.44.2
América Movil – ADRMexico5.04.8
B3Brazil4.63.0
Grupo Financiero BanorteMexico4.02.9
Walmart de México y CentroaméricaMexico3.93.2
AmBev – ADRBrazil3.52.3
Gerdau – Preference SharesBrazil3.11.1

Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;

For the month of March 2022, the Company’s NAV returned 15.0%1 with the share price moving 17.2%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 15.2%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).

Latin American (LatAm) equities posted a positive performance over the month with Brazil and Colombia leading the rise.

Security selection in Peru contributed the most to relative performance over the period while security selection in Brazil detracted most from relative returns. An overweight position in the Brazilian steel producer, Gerdau, was top contributor during the month as the company’s ability to generate strong free cash flow in the context of a rising price environment has benefitted the share price. An overweight position in Brazilian financial services group, Itau, also benefitted the portfolio as it was expected that the banking business should experience growth in interest income on the back of the higher cost of borrowing in Brazil. On the other hand, an off-benchmark holding in Copa, a Panamanian airline, detracted most from relative performance following underperformance of the stock. We believe pricing power has increased as the company is navigating through the crisis well and we believe will end up in a better competitive position given multiple regional competitors are going through financial restructuring. An overweight position in Chilean department store, Falabella, also weighed on relative returns following a slowdown of growth in consumption in Chile coupled with poorer margins.

Over the month we added to Brazilian brewing company, Ambev, as we believe the stock is trading at attractive valuations while the company focuses on premiumization, innovation and diversification to bring new consumers on board and strengthen its brands. We initiated a position in Brazilian logistics company, Santos Brasil, as we see the port operator as well positioned in terms of available capacity in one of the largest and most congested seaports in Brazil, which should lead the company to grow volumes above those of the market, despite the ongoing global logistics bottlenecks.  We reduced exposure to Brazilian stock exchange, B3, to take profits following stock outperformance.  The portfolio ended the period being overweight to Brazil and Mexico, whilst being underweight to Colombia. At the sector level, we are overweight financials and health care, and underweight energy and utilities.

Latin American equities are bouncing back from a challenging 2021 as investors learn to live with the region’s political risk and focus instead on soaring local interest rates and commodity prices. LatAm currency remains relatively cheap at current levels as 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 Mexico and Colombia have both surprised markets with steep hikes this year in preparation for Federal Reserve tightening measures. Meanwhile, Brazilian policy makers have increased borrowing costs to the highest levels in almost five years. Latin America has been proactive in hiking rates and is considered to be ahead of the curve from a monetary policy standpoint relative to developed markets. Having been one of the worst performing Emerging Market currencies last year, the Brazilian Real has shown robust appreciation this year with the currency strengthening on the back of higher interest rates while rises in commodity prices have certainly played a role. The prices of oil, soybeans and iron ore (Brazil’s main commodity exports) have increased since the start of the year. What’s more, high interest rates are making local assets more attractive. There is no clear hint that the underlying force behind the rally is fading. Latin America’s high yields compared with peers and relatively cheap local stock markets continue to attract foreign account inflows. Global rotation from growth stocks into value stocks continue to boost performance in Latin America and considering the Federal Reserve’s pace of interest rate rises, this may keep investors away from growth stocks for now. We would argue that for many reasons LatAm would seem well-positioned ahead of rising geopolitical tensions as the region provides:  i)  geographic and economic insulation from the recent conflict; ii) long and wide commodities exposure; iii) cheap currencies; iv) attractive valuation entry points; and v) proactive monetary policy stances.

1Source: BlackRock, as of 31 March 2022.

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

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