BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.
All information is at 31 July 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
|Net asset value^||4.3||-6.4||-1.9||-22.5||-4.4|
|MSCI EM Latin America|
|Net asset value^||4.6||-9.3||-14.2||-23.0||-11.9|
|MSCI EM Latin America|
^^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:||379.93p|
|Net asset value – including income:||389.37p|
|Discount (share price to cum income NAV):||8.8%|
|Average discount* over the month – cum income:||7.6%|
|Net gearing at month end**:||9.8%|
|Gearing range (as a % of net assets):||0-25%|
|Ordinary shares in issue(excluding 2,181,662 shares held in treasury):||29,448,641|
#Total assets include current year revenue.
##The yield of 6.1% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 26.27 cents per share) and using a share price of 432.00 US cents per share (equivalent to the sterling price of 355.00 pence per share translated in to US cents at the rate prevailing at 31 July 2022 of $1.2168 dollars to £1.00).
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 (paid on 16 May 2022).
2022 Q2 Interim dividend of 5.74 cents per share (payable on 12 August 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.
|% of Equity Portfolio *||MSCI EM Latin America Index|
|Net current liabilities (inc. fixed interest)||-1.0||0.0||0.0|
^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 8.8% of the Company’s net asset value.
|Sector||% of Equity Portfolio*||% of Benchmark*|
*excluding net current assets & fixed interest
|Country of Risk||% of|
|Petrobrás – ADR:||Brazil|
|Vale – ADS||Brazil||7.8||10.1|
|Banco Bradesco – ADR||Brazil||6.1||4.2|
|Itaú Unibanco – ADR||Brazil||5.8||4.1|
|Grupo Financiero Banorte||Mexico||4.4||2.8|
|AmBev – ADR||Brazil||4.2||2.5|
|FEMSA – ADR||Mexico||3.9||2.3|
|Suzano Papel e Celulose||Brazil||3.0||1.3|
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;
For the month of July 2022, the Company’s NAV returned 4.3% with the share price increasing by 1.4%. The Company’s benchmark, the MSCI EM Latin America Index, returned 4.1% 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 Chile and Brazil leading the rise.
Allocation in Brazil contributed the most to relative performance over the period while security selection in Chile was the largest detractor. Our underweight position in Brazilian mining company, Vale, was a top contributor to the portfolio following a slow down in the Chinese property market which has reduced demand for steel and as a result of that, iron ore. An underweight position in Mexican Telecommunications company, America Movil, also benefitted the portfolio during the month and our position reflects our view that the shares are trading expensively relative to historical valuations. On the other hand, a lack of holding in Chilean chemical company, Sociedad Quimica y Minera de Chile, detracted most from relative performance as the company’s main product, lithium, benefitted from a rising price environment given strong expected demand from electronic vehicle producers. The portfolio’s overweight position in Mexican beverages and retail company, Fomento Economico, also detracted from returns as the stock underperformed following negative investor sentiment around the company’s acquisition of Swiss kiosk operator, Valora.
Over the month we added to Mexican beverages and retail company, Fomento Economico, as we believe the operating environment (and hence the earnings outlook for the convenience business) will maintain a robust pace of growth. We d have been increasing exposure as we believe valuations are attractive. We initiated a position in Brazilian shopping centre, Iguatemi, as we are bullish on premium focused mall exposure and see improving fundamentals in rental rates and occupancy. We reduced our exposure to Mexican real estate investment trust company, Fibra Uno, as we believe office and retail segments continue to weigh on company results in a stagflation environment. We sold our holding in Chilean retail platform, Falabella, as we expect suboptimal returns following a large investment in omnichannel. The portfolio ended the period being overweight to Brazil and Argentina, whilst being underweight to Chile and Colombia. At the sector level, we are overweight financials and real estate, and underweight communication services and utilities.
The fundamentals around Latin American equities have steadily improved 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 the region have both 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 has been proactive in hiking rates and is considered to be ahead of the curve from a monetary policy standpoint relative to developed markets. From a positioning standpoint, we have been favouring domestic stocks that are more sensitive to interest rates in Brazil, on the view that the nation’s next president is likely to implement relatively orthodox macro policies and the Brazilian Central Bank should start an easing cycle in 2023. Although there are some uncertainties ahead of the October Brazilian Presidential election, 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, Russia and India grapple with their own issues. 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.