BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.
All information is at 30 November 2020 and unaudited.
To learn more about this trust 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^ | 21.4 | 12.5 | -17.2 | -9.4 | 47.0 |
| Share price | 20.2 | 18.3 | -14.3 | -3.6 | 51.9 |
| MSCI EM Latin America (Net Return)^^ | 18.0 | 14.6 | -17.7 | -10.5 | 48.0 |
| US Dollars: | |||||
| Net asset value^ | 25.4 | 12.7 | -14.5 | -10.6 | 30.3 |
| Share price | 24.1 | 18.5 | -11.5 | -4.9 | 34.7 |
| MSCI EM Latin America (Net Return)^^ | 21.9 | 14.3 | -15.0 | -11.7 | 31.2 |
^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. Historically the benchmark data for the Company has always been stated on a Gross basis. However, as disclosed in the Company’s Interim Report for the six months ended 30 June 2018, it is the Board’s intention to monitor the Company’s performance with reference to the NR version of the benchmark. For transparency both sets of benchmark data have been provided.
Sources: BlackRock, Standard & Poor’s Micropal
At month end
| Net asset value – capital only: | 392.05p |
| Net asset value – including income: | 396.04p |
| Share price: | 363.50p |
| Total assets#: | £168.2m |
| Discount (share price to cum income NAV): | 8.2% |
| Average discount* over the month – cum income: | 12.6% |
| Net gearing at month end**: | 8.2% |
| Gearing range (as a % of net assets): | 0-25% |
| Net yield##: | 5.3% |
| 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 5.1% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 24.76 cents per share) and using a share price of 485.31 US cents per share (equivalent to the sterling price of 363.50 pence per share translated in to US cents at the rate prevailing at 30 November 2020 of $1.33511 dollars to £1.00).
2019 Q4 Final dividend of 9.15 cents per share (paid on 06 February 2020).
2020 Q1 interim dividend of 4.59 cents per share (paid on 20 May 2020).
2020 Q2 interim dividend of 5.57 cents per share (paid on 11 August 2020).
2020 Q3 interim dividend of 5.45 cents per share (paid 09 November 2020).
*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 2019.
| Geographic Exposure | % of Total Assets | % of Equity Portfolio * | MSCI EM Latin America Index |
| Brazil | 61.5 | 61.5 | 63.5 |
| Mexico | 26.9 | 26.9 | 22.8 |
| Chile | 8.6 | 8.6 | 6.5 |
| Argentina | 3.0 | 3.0 | 1.7 |
| Peru | 0.0 | 0.0 | 3.1 |
| Colombia | 0.0 | 0.0 | 2.4 |
| Net current liabilities (inc. fixed interest) | 0.0 | 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 8.2% of the Company’s net asset value.
| Sector | % of Equity Portfolio* | % of Benchmark* |
| Materials | 27.3 | 19.9 |
| Financials | 23.6 | 25.6 |
| Consumer Discretionary | 11.3 | 6.7 |
| Industrials | 8.7 | 7.0 |
| Energy | 8.5 | 9.3 |
| Communication Services | 6.8 | 6.8 |
| Real Estate | 3.8 | 0.8 |
| Consumer Staples | 3.7 | 14.8 |
| Health Care | 3.3 | 2.1 |
| Utilities | 1.7 | 5.7 |
| Information Technology | 1.3 | 1.3 |
| —– | —– | |
| Total | 100.0 | 100.0 |
| ===== | ===== |
*excluding net current assets & fixed interest
Company | Country of Risk | % of Equity Portfolio | % of Benchmark |
| Petrobras – ADR | Brazil | 8.5 | 7.1 |
| Vale – ADS | Brazil | 7.9 | 9.6 |
| Banco Bradesco – ADR | Brazil | 7.7 | 4.6 |
| B3 | Brazil | 4.8 | 3.9 |
| America Movil – ADR | Mexico | 4.8 | 4.5 |
| Grupo Mexico | Mexico | 4.1 | 2.0 |
| Quimica Y Minera – ADR | Chile | 3.8 | 0.0 |
| Walmart de Mexico y Centroamerica | Mexico | 3.7 | 2.5 |
| Cemex | Mexico | 3.5 | 1.2 |
| Suzano | Brazil | 3.4 | 1.4 |
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;
For the month of November 2020, the Company’s NAV returned 21.4%1 with the share price moving 20.2%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 18.0%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).
Latin American equities were strong in November, out-performing the developed and emerging markets. All Latin American countries posted positive performance, with Brazil and Colombia leading the rise.
Stock selection in Argentina contributed most to relative performance over the period, while stock selection in Mexico detracted most on relative returns. A lack of position in Magazine Luiza, a Brazilian retail company, contributed the most to relative performance as e-commerce stocks were sold off globally on the back of market rotation from growth to value stocks after positive COVID-19 vaccine news and expectations of post-pandemic normalization and recovery. An off-benchmark holding in Gol Linhas Aeras Inteligentes, a Brazilian low-cost airline, added to performance as the stock rose on positive operating momentum geared towards the reopening of the economy trade. Alternatively, an overweight position in B2W Companhia Digital, a Brazilian online retail company, was the top detractor on a relative basis as the stock declined on increased competition and loss of market share. An off-benchmark holding in Afya, a leading medical education group in Brazil, also weighed on returns during the month as the stock lost gains following a strong period of year-to-date outperformance.
Over the month, we added to Brazilian petroleum company, Petroleo Brasileiro, as we believe the company should see major advancement in its restructuring next year through key divestments in non-core assets, allowing for a sharp drop in debt. We initiated a position in Mexican mass multimedia company, Grupo Televisa, as the recent quarter showed encouraging trends in respect of cable subscribers, price increases and margin improvements. We reduced exposure to Mexican bank, Grupo Financiero Banorte, following a strong run of relative outperformance. We sold our holding in Brazilian retail chain, Lojas Renner, locking in profits following outperformance. The portfolio ended the month being overweight in Brazil and Mexico, while being underweight in Peru and Colombia. At the sector level, we are overweight materials and consumer discretionary; and underweight consumer staples and utilities.
We are optimistic on returns for Latin American equities going forward, given the prospect for low global interest rates to persist over the medium-term, economic recovery in 2021 and anticipation of a weaker US dollar environment favouring Latin American currencies. In Brazil, the portfolio is tilted towards re-opening trade as we believe high mobility stocks have a greater opportunity to outperform their low mobility peers and are aided by a material and persistent valuation gap for these stocks that has accumulated since the peak of the domestic lockdown in mid-May. Meanwhile, in the US, the demand recovery and healthy housing market should favour Mexico given supply chain linkages and trade flows between the countries. Politics and vaccine hopes are catalysing a reflation trade. This is in line with a temporary period in which inflation, thanks to commodities, rises in a repeat of the exit from the Global Financial Crisis. Higher raw material prices should also provide a tailwind for Latin America given the high level of commodity exports across major economies in the region. Focusing on Brazil, more cyclical and credit-dependent sectors appear to be recovering faster. This sectoral dynamic suggests that the Brazil Central Bank’s liquidation and risk reduction measures have — thus far — not only prevented an explosion in defaults but have also allowed banks to cushion the negative impacts of the crisis, with credit playing an important anti-cyclical roll. In the long run, to consolidate this recovery, we believe that stringent fiscal discipline is needed to limit the fiscal legacy of emergency measures. Additional data points that confirms the recovery is underway includes third quarter company operational earnings which broadly beat expectations. General trends across sectors show that the top line continued to recover, at least sequentially. Efficiencies increased across many companies, with costs cutting and expense reduction initiatives benefitting margins, which in general terms led to the aforementioned earnings beats to quarterly estimates. We even saw some companies lowering leverage, going ahead with buybacks or increasing capital expenditure plans which points to resumption of business confidence and strength of balance sheets.
1Source: BlackRock, as of 30 November 2020.
To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla
22 December 2020
