BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC The information contained in this release was correct as at 31 October 2023. 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 2023 and unaudited.
Performance at month end with net income reinvested
| One | Three | One | Three | Five |
Sterling: |
|
|
|
|
|
Net asset value^ | -7.0 | -13.4 | -1.6 | 54.0 | 6.4 |
Share price | -8.3 | -16.3 | -2.3 | 43.6 | 11.1 |
MSCI EM Latin America | -4.2 | -8.5 | -1.6 | 56.4 | 11.3 |
US Dollars: |
|
|
|
|
|
Net asset value^ | -7.6 | -18.3 | 3.7 | 44.5 | 1.1 |
Share price | -8.9 | -21.0 | 3.0 | 34.8 | 5.6 |
MSCI EM Latin America | -4.8 | -13.7 | 3.7 | 46.8 | 5.7 |
^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: | 419.88p |
Net asset value - including income: | 422.02p |
Share price: | 358.50p |
Total assets#: | £133.3m |
Discount (share price to cum income NAV): | 15.1% |
Average discount* over the month – cum income: | 14.5% |
Net Gearing at month end**: | 7.5% |
Gearing range (as a % of net assets): | 0-25% |
Net yield##: | 9.2% |
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 9.2% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 40.06 cents per share) and using a share price of 435.02 US cents per share (equivalent to the sterling price of 358.50 pence per share translated in to US cents at the rate prevailing at 31 October 2023 of $1.213 dollars to £1.00).
2022 Q4 Interim dividend of 6.29 cents per share plus a Special Dividend of 13.00 cents per share (paid on 12 January 2023).
2023 Q1 Interim dividend of 6.21 cents per share (Paid on 16 May 2023)
2023 Q2 Interim dividend of 7.54 cents per share (Paid on 11 August 2023)
2023 Q3 Interim dividend of 7.02 cents per share (Payable on 09 November 2023)
*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 2022.
Geographic Exposure | % of Total Assets | % of Equity Portfolio * | MSCI EM Latin America Index |
Brazil | 59.3 | 59.2 | 62.4 |
Mexico | 26.9 | 26.9 | 27.9 |
Chile | 5.7 | 5.7 | 5.5 |
Colombia | 3.5 | 3.4 | 1.2 |
Argentina | 3.3 | 3.3 | 0.0 |
Panama | 1.5 | 1.5 | 0.0 |
Peru | 0.0 | 0.0 | 3.0 |
Net current Liabilities (inc. fixed interest) | -0.2 | 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 7.2% of the Company’s net asset value.
Sector | % of Equity Portfolio* | % of Benchmark* |
Financials | 22.8 | 25.2 |
Consumer Staples | 18.9 | 16.9 |
Materials | 16.1 | 18.4 |
Energy | 11.8 | 14.3 |
Industrials | 11.1 | 9.5 |
Consumer Discretionary | 9.1 | 1.8 |
Health Care | 3.6 | 1.6 |
Real Estate | 2.7 | 0.8 |
Communication Services | 2.0 | 4.4 |
Information Technology | 1.9 | 0.4 |
Utilites | 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 – ADS | Brazil | 10.1 | 8.6 |
Petrobrás – ADR: | Brazil |
|
|
Equity |
| 5.9 | 5.1 |
Preference Shares |
| 3.4 | 6.0 |
FEMSA - ADR | Mexico | 5.9 | 4.0 |
Banco Bradesco – ADR: | Brazil |
|
|
Equity |
| 4.3 | 0.7 |
Preference Shares |
| 1.6 | 2.7 |
Walmart de México y Centroamérica | Mexico | 4.9 | 3.4 |
B3 | Brazil | 4.7 | 2.4 |
AmBev – ADR | Brazil | 4.4 | 2.2 |
Grupo Financiero Banorte | Mexico | 3.9 | 3.9 |
Itaú Unibanco – ADR | Brazil | 3.4 | 4.7 |
Grupo Aeroportuario del Pacifico – ADS | Mexico | 3.0 | 0.8 |
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Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;
The Company’s NAV was down by 7.0% in October, underperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -4.2% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.
During October, Latin America performed poorly with all regional markets losing ground. Chile (-9.1%) fell most but Mexico (-6.2%) and Brazil (-3.7%) also fell. Brazil’s equity market was negatively impacted by rising US interest rates which put pressure on the Brazilian currency.
On the political front, Argentina had the first rounds of a general election where the market was surprised by the victory of Sergio Massa, the current finance minister. Massa and Javier Milei, who was expected to take first place, will go to a runoff vote in late November. In Colombia, regional elections took place, where the opposition party won in the main cities.
In October, our Colombian holdings added value, driven mainly by our holding in Ecopetrol. Alternatively, Brazil detracted, as our holdings in the consumer discretionary and financial sectors continued to sell-off. Hapvida, a health care operator, Vamos, a truck leasing company, EZ Tec, a real estate developer and MRV, a homebuilder, were amongst the top five detractors to performance in October. Elsewhere in Brazil materials company, Vale, reported good third quarter results following strong iron ore pricing.
The main negative contributor to the portfolio performance during the period from an issuer level was Grupo Aeroportuario del Pacifico (GAPB), a Mexican airport operator. The entire Mexican airport sector declined after the announcement of regulatory changes, which implied lower profit margins for the sector. However, we believe that the market reaction was overdone and that the impact may be less severe than initially anticipated. We added to GAPB, to maintain our position weight post the sell-off.
In Brazil, we trimmed our position in Assai, while we added to our holding in EZ Tec. We also added to Chilean lithium miner, SQM, following some weakness in the share price. In Mexico we added to Wal Mart Mexico and FEMSA as we like the defensive quality of these businesses, while we reduced our position in Banorte following strong relative performance.
Our largest overweight exposure is to Argentina, driven by two off-benchmark holdings. Our second largest overweight position is in Colombia via our stock specific positions in the energy and financial sector. On the other hand, we are underweight to Peru, due to its political and economic uncertainty. We remain positive on the outlook for Brazil and have been selective in our positioning with preference to domestic businesses that will benefit more from further rate cuts.
Outlook
We remain optimistic about the outlook for Latin America. Central banks have been proactive in increasing interest rates to help control inflation, which has now started to fall across most countries in the region. As such we have started to see central banks beginning to lower interest rates, which should support both economic activity and asset prices. In addition, the whole region is benefitting from being relatively isolated from global geopolitical conflicts. We believe that this will lead to an increase in foreign direct investment.
Brazil is the showcase of this thesis - with the central bank cutting the policy rate by another 50bps in October (100bps in total cut in previous two months). The government’s fiscal framework being more orthodox than market expectations also helped to reduce uncertainty regarding the fiscal outlook and was key for confidence. We expect further upside to the equity market in the next 12-18 months as local capital starts flowing back into the market.
We remain positive on the outlook for the Mexican economy as it is a key beneficiary of the friend-shoring of global supply chains, though we have reduced our overweight, locking in outperformance versus our positioning a year ago. We also note that the Mexican economy will be relatively more sensitive to a potential slowdown in economic activity in the United States.
1Source: BlackRock, as of 31 October 2023.
4 December 2023
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.
