BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.
All information is at 31 August 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^ | 10.1 | -2.2 | 6.0 | -3.5 | -2.1 |
| Share price | 7.2 | -11.1 | 8.1 | 0.3 | 2.3 |
| MSCI EM Latin America (Net Return)^^ | 7.4 | -3.7 | 9.9 | 0.1 | 1.7 |
| US Dollars: | |||||
| Net asset value^ | 5.3 | -9.7 | -10.4 | -7.7 | -11.6 |
| Share price | 2.5 | -17.9 | -8.6 | -4.1 | -7.7 |
| MSCI EM Latin America (Net Return)^^ | 2.7 | -11.1 | -7.1 | -4.4 | -8.2 |
^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: | 407.83p |
| Net asset value – including income: | 428.82p |
| Share price: | 380.50p |
| Total assets#: | £135.4m |
| Discount (share price to cum income NAV): | 11.3% |
| Average discount* over the month – cum income: | 11.2% |
| Net gearing at month end**: | 5.6% |
| Gearing range (as a % of net assets): | 0-25% |
| Net yield##: | 5.9% |
| 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 5.9% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 26.27 cents per share) and using a share price of 442.75 US cents per share (equivalent to the sterling price of 380.50 pence per share translated in to US cents at the rate prevailing at 31 August 2022 of $1.1636 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 (paid 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.
| Geographic Exposure | % of Total Assets | % of Equity Portfolio * | MSCI EM Latin America Index |
| Brazil | 62.9 | 63.9 | 64.2 |
| Mexico | 23.9 | 24.3 | 24.3 |
| Chile | 3.7 | 3.8 | 7.1 |
| Argentina | 3.2 | 3.2 | 0.0 |
| Peru | 2.6 | 2.6 | 2.7 |
| Panama | 2.2 | 2.2 | 0.0 |
| Colombia | 0.0 | 0.0 | 1.7 |
| Net current assets (inc. fixed interest) | 1.5 | 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 7.1% of the Company’s net asset value.
| Sector | % of Equity Portfolio* | % of Benchmark* |
| Financials | 28.2 | 24.6 |
| Materials | 18.0 | 20.5 |
| Consumer Staples | 13.1 | 14.3 |
| Energy | 11.1 | 13.8 |
| Industrials | 9.4 | 7.9 |
| Real Estate | 5.9 | 0.6 |
| Health Care | 4.9 | 2.4 |
| Consumer Discretionary | 4.0 | 2.9 |
| Communication Services | 2.7 | 6.4 |
| Information Technology | 1.8 | 0.4 |
| Utilities | 0.9 | 6.2 |
| —– | —– | |
| Total | 100.0 | 100.0 |
| ===== | ===== |
*excluding net current assets & fixed interest
Company | Country of Risk | % of Equity Portfolio | % of Benchmark |
| Petrobrás – ADR: | Brazil | ||
| Equity | 5.8 | 5.0 | |
| Preference Shares | 3.9 | 5.7 | |
| Vale – ADS | Brazil | 7.1 | 9.3 |
| Banco Bradesco – ADR | Brazil | 6.5 | 4.6 |
| Itaú Unibanco – ADR | Brazil | 6.3 | 4.5 |
| Grupo Financiero Banorte | Mexico | 4.5 | 2.9 |
| AmBev – ADR | Brazil | 4.3 | 2.6 |
| B3 | Brazil | 4.1 | 2.6 |
| FEMSA – ADR | Mexico | 4.1 | 2.3 |
| Hapvida Participacoes | Brazil | 3.4 | 1.2 |
| Suzano Papel e Celulose | Brazil | 2.7 | 1.2 |
Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;
For the month of August 2022, the Company’s NAV returned 10.1%1 with the share price increasing by 7.2%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 7.4%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 Brazil and Chile leading the rise.
Security selection in Mexico and Brazil contributed most to relative performance over the period. Our overweight position in Brazilian healthcare company, Hapvida, was the top contributor to the portfolio after posting positive 2Q22 earnings results. The company is gaining health care patients at a faster pace than peers due to its newly launched national plan and is seeing improving operating trends and margins as a result.. An off-benchmark position in Brazilian logistics company, Santos Brasil, also benefitted the portfolio as the company has performed well on the back of contract renegotiations and high utilization rates. On the other hand, our underweight position in Brazilian petroleum company, Petrobras, detracted most from relative performance as the company posted positive 2Q22 earnings results. Our off-benchmark position in XP Inc., a Brazilian investment management company, also weighed on relative returns as the company has recently been negatively impacted by a jump in expenses and investments in new projects.
Over the month we added to the Mexican beverages and retail company, Femsa, as in our opinion the share price has been overly penalized for a debatable capital allocation decision, which overshadows a strong operating environment at its core convenience store business (Oxxo). The latter is recovering nicely as mobility in Mexico keeps improving every month, which we believe will result in further operating leverage. We reduced exposure to Mexican real estate investment trust company, Fibra Uno, as we have been somewhat disappointed by the degree to which it has been able to pass on cost inflation through to rents for its office and retail assets. We sold our holding of the Brazilian telecommunications company, TIM, as we expect to see underperformance within the telecommunications sector.
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. Latin America currencies remains relatively cheap at current levels as the combination of rising interest rates and low valuations has been attracting investors to increase regional exposure. Central banks in the region were the first to raise rates last year and policy makers 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 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 favoring 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.
1Source: BlackRock, as of 31 August 2022.
20 September 2022
To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla
