BlackRock Latin American Investment Trust NAV returned 6.4% with the share price moving 9.1%

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

All information is at 30 June 2021 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^6.413.431.514.030.6
Share price9.113.027.223.540.8
MSCI EM Latin America
(Net Return)^^
5.714.929.610.828.8
US Dollars:
Net asset value^3.713.647.119.334.8
Share price6.313.142.329.345.4
MSCI EM Latin America
(Net Return)^^
2.715.044.915.933.1

^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:448.93p
Net asset value – including income:452.67p
Share price:409.00p
Total assets#:£197.7m
Discount (share price to cum income NAV):9.6%
Average discount* over the month – cum income:12.6%
Net gearing at month end**:11.4%
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 27.69 cents per share) and using a share price of 565.01 US cents per share (equivalent to the sterling price of 409.00 pence per share translated in to US cents at the rate prevailing at 30 June 2021 of $1.3814 dollars to £1.00).

2020 Q3 interim dividend of 5.45 cents per share (paid 09 November 2020).
2020 Q4 Final dividend of 7.45 cents per share (paid on 08 February 2021).
2021 Q1 interim dividend of 6.97 cents per share (paid on 10 May 2021).
2021 Q2 interim dividend of 7. 82 cents per share (payable on 6 August 2021).

*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 2020.

Geographic
Exposure
% of
Total Assets
% of Equity Portfolio *MSCI EM Latin America Index
Brazil62.562.466.5
Mexico23.023.022.2
Chile9.19.15.6
Argentina2.82.81.6
Peru1.71.72.3
Panama1.01.00.0
Colombia0.00.01.8
Net current liabilities (inc. fixed interest)-0.10.00.0
—–—–—–
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 11.2% of the Company’s net asset value.

Sector% of Equity Portfolio*% of Benchmark*
Materials25.125.1
Financials22.423.4
Industrials9.05.7
Consumer Discretionary8.96.0
Energy7.49.8
Consumer Staples7.014.5
Health Care5.72.7
Communication Services5.56.1
Information Technology4.21.8
Real Estate2.90.6
Utilities1.94.3
—–—–
Total100.0100.0
==========

*excluding net current assets & fixed interest


Company
Country of Risk% of
Equity Portfolio
% of
Benchmark
Vale – ADSBrazil10.113.3
Petrobrás – ADR:Brazil
  – Equity4.83.3
  – Preference Shares2.64.1
Banco Bradesco – ADRBrazil7.34.7
América Movil – ADRMexico4.93.8
B3Brazil4.03.1
Grupo Financiero BanorteMexico3.42.5
Walmart de México y CentroaméricaMexico3.12.5
Notre Dame Intermedica ParticipaçõesBrazil3.11.3
Cemex – ADRMexico3.01.9
Via VarejoBrazil2.70.6

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

For the month of June 2021, the Company’s NAV returned 6.4%1 with the share price moving 9.1%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 5.7%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).

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

Stock selection in Brazil contributed the most to relative performance over the period while stock selection in Mexico detracted most from relative returns. An overweight position in Brazilian retail company, Via Varejo, was the top contributor on a relative basis as the company’s management has been supportive of turnaround narrative for the company. A position in Brazilian mining company, Vale, also benefitted the Company on the back of increased demand driving an increase in  iron-ore prices.  On the other hand, an off-benchmark holding in Cielo, a Brazilian payment system company, detracted most from relative performance during the period. Tougher competition has emerged recently in the Brazilian payment space, challenging Cielo’s dominant position in the industry. An overweight position in Fibra Uno, a Mexican real estate investment trust company, also weighed on relative returns as the stock underperformed in the midst of Mexican midterm election uncertainty.

Over the month we added to Credicorp, a Peruvian financial services company, on the view that political uncertainty is creating opportunity for long-term alpha generation. The country was in the midst of a tightly contested Presidential election which created a great deal of uncertainty and caused a sharp depreciation of the currency, despite favourable external conditions from high metal prices. We believe fears of radical changes to the favorable institutional framework of the company are overdone and are looking to add exposure on the back of price volatility driven by political uncertainty.  We initiated a position in Copa Holdings, a Panamanian airline company, on the view that the company is well positioned for return of demand to underserved markets with limited substitutions for air travel. We reduced exposure to Brazilian retail chain company, Lojas Americanas, given low conviction on the stock as the company continues to lag behind peers in operational metrics and corporate governance issues. We sold our holding in Santos Brasil, a Brazilian logistics company, to take profits following the stock’s outperformance driven by strength in import and export of commodities. The portfolio ended the period being overweight to Chile and Mexico, whilst being underweight to Colombia and Peru. At the sector level, we are overweight industrials and consumer discretionary, and underweight consumer staples and utilities.

While the recovery gains traction, a more nuanced picture emerges among LatAm countries. Dealing with a prolonged shock is proving to be a challenge, and while the cyclical rebound somewhat levels the short-term narratives, prospects beyond 2021 reveal a more nuanced picture. Our country positioning favours countries with better fundamentals, which display a healthier sovereign credit profile and are better placed to benefit from the strong rebound in the US and in China. We see Chile and Mexico meeting these criteria, while more indebted and less open economies, such as Argentina, Brazil and Colombia may struggle to sustain above-trend growth. The COVID-19 crisis led to a jump in public sector debt. Economies with a weak starting point on debt metrics saw debt-to-GDP (Gross Domestic Product) ratios soar, with Brazil and Argentina reaching a threshold where debt dynamics turn into a real concern, in our view. These countries now have limited room for any additional fiscal policy support, and we could argue the same about Colombia, despite lower debt levels. In Chile and Mexico, debt is at less worrisome levels and the current fiscal outlook point to manageable debt-to-GDP ratios over the coming years. The external environment remains supportive for Latin America. The continuation of the global V-shaped recovery should be led by a robust capex (capital expenditure) cycle going forward, meaning continued support for currently high commodity prices. This is key to the growth performance for the region but especially beneficial for Mexico and is likely to help Chile to sustain above-average expansion. Commodity champions, such as Argentina, Brazil and Colombia will also benefit from this external push, but the traction generated for these less open and domestic-driven economies is a fraction of the positive impact expected for more open economies. In spite of the current rebound, important idiosyncratic risks remain. These risks mainly relate to the growing strength of unorthodox policy ideas in a region historically marked by significant inequality. The political calendar concentrates a number of key electoral events from now to the end of 2022, and it is reasonable to expect a growing debate around proposals which would increase state intervention and government spending. Whether these proposals and the candidacies backing them will get rewarded by voters is hard to say, but in the aftermath of the COVID-19 shock, this may prove the key question for Latin America going forward.

1Source: BlackRock, as of 30 June 2021.

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

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BlackRock Latin American Investment Trust plc (LON:BRLA) has announced a full disclosure of portfolio investments for BlackRock Latin American Investment Trust plc as at 30 November 2020 has been made available on the Company’s website at the link