BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.
All information is at 31 May 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^ | 5.4 | 9.9 | 10.1 | -3.6 | 16.2 |
| Share price | 7.0 | 16.7 | 22.4 | 11.2 | 32.9 |
| MSCI EM Latin America (Net Return)^^ | 7.8 | 13.3 | 17.1 | 5.1 | 20.7 |
| US Dollars: | |||||
| Net asset value^ | 5.8 | 3.2 | -2.2 | -3.6 | 13.4 |
| Share price | 7.4 | 9.6 | 8.8 | 11.2 | 29.6 |
| MSCI EM Latin America (Net Return)^^ | 8.2 | 6.4 | 3.8 | 5.1 | 17.8 |
^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: | 430.92p |
| Net asset value – including income: | 444.44p |
| Share price: | 434.00p |
| Total assets#: | £144.9m |
| Discount (share price to cum income NAV): | 2.4% |
| Average discount* over the month – cum income: | 4.4% |
| Net gearing at month end**: | 10.2% |
| Gearing range (as a % of net assets): | 0-25% |
| Net yield##: | 5.2% |
| 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 5.2% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 28.35 cents per share) and using a share price of 546.94 US cents per share (equivalent to the sterling price of 434.00 pence per share translated in to US cents at the rate prevailing at 31 May 2022 of $1.2602 US Dollars to £1.00).
2021 Q2 interim dividend of 7.82 cents per share (paid on 6 August 2021).
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).
*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 | 62.6 | 62.9 | 62.7 |
| Mexico | 25.7 | 25.8 | 25.8 |
| Chile | 5.7 | 5.7 | 6.2 |
| Argentina | 2.0 | 2.0 | 0.0 |
| Peru | 1.9 | 2.0 | 2.7 |
| Panama | 1.6 | 1.6 | 0.0 |
| Colombia | 0.0 | 0.0 | 2.6 |
| Net current assets (inc. fixed interest) | 0.5 | 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 10.7% of the Company’s net asset value.
| Sector | % of Equity Portfolio* | % of Benchmark* |
| Financials | 27.3 | 24.8 |
| Materials | 22.0 | 24.3 |
| Consumer Staples | 13.4 | 14.0 |
| Industrials | 8.9 | 6.5 |
| Energy | 7.6 | 12.2 |
| Communication Services | 5.7 | 7.8 |
| Real Estate | 4.2 | 0.5 |
| Health Care | 4.2 | 2.0 |
| Consumer Discretionary | 3.8 | 3.1 |
| Information Technology | 2.0 | 0.5 |
| Utilities | 0.9 | 4.3 |
| —– | —– | |
| Total | 100.0 | 100.0 |
| ===== | ===== | |
*excluding net current assets & fixed interest
Company | Country of Risk | % of Equity Portfolio | % of Benchmark |
| Vale – ADS | Brazil | 8.7 | 12.2 |
| Petrobrás – ADR: | Brazil | ||
| Equity | 4.3 | 4.3 | |
| Preference Shares | 3.3 | 4.9 | |
| Banco Bradesco – ADR | Brazil | 6.6 | 4.7 |
| Itaú Unibanco – ADR | Brazil | 5.9 | 4.4 |
| Grupo Financiero Banorte | Mexico | 4.2 | 2.7 |
| B3 | Brazil | 4.2 | 2.7 |
| Walmart de México y Centroamérica | Mexico | 4.1 | 3.1 |
| FEMSA – ADR | Mexico | 3.9 | 2.4 |
| AmBev – ADR | Brazil | 3.7 | 2.3 |
| Gerdau – Preference Shares | Brazil | 3.4 | 1.1 |
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;
For the month of May 2022, the Company’s NAV returned 5.4%1, with the share price moving 7.0%1. The Company’s benchmark, the MSCI EM Latin America Index, returned 7.8%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 Colombia leading the rise.
Security selection in Peru contributed the most to relative performance over the period while security selection in Brazil detracted most from relative returns. An absence in the portfolio of the Brazilian electric engineering company, Weg, was the top contributor to performance during the month; our view remains that the stock is expensive and rising input costs are likely to weigh on near term profits. An overweight position in Chilean pulp and paper company, Empresas CMPC, also benefitted the portfolio as the company is performing well on the back of current elevated pulp prices stemming from supply constraints. On the other hand, the lack of any 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 the rising price environment given strong expected demand from electronic vehicle producers. An overweight position in Brazilian healthcare company, Hapvida, also detracted from relative performance as the stock has been impacted this year following COVID related spikes in healthcare costs which have been eating into the company’s profitability. We continue to have strong conviction in the stock given the recent merger with Intermedica (another healthcare company). The combined entity will have greater scale which should translate in to better procurement terms in the future. As such, we have added to our position in the stock as we see the name trading at attractive fundamentals following its recent underperformance.
We reduced our exposure to Brazilian bank, Banco Bradesco, to take profits following stock outperformance. We sold our holding in Brazilian food processing company, Marfrig, as we see signs of the cattle cycle turning for next few years leading to downside to margin expectations. The portfolio ended the period being overweight to Brazil and Mexico, whilst being underweight to Colombia and Peru. At the sector level, we are overweight financials and real estate, and underweight energy and utilities.
Latin American equities are bouncing back 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 Mexico and Colombia have both surprised markets with steep hikes this year in preparation for Federal Reserve tightening. Meanwhile, Brazilian policy makers have increased borrowing costs to the highest levels in almost five years. 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. Having been one of the worst performing Emerging Market currencies last year, the Brazilian Real has shown robust appreciation this year with the currency strengthening on the back of higher interest rates while rises in commodity prices have certainly played a role. The prices of oil, soybeans and iron ore (Brazil’s main commodity exports) have increased since the start of the year. What’s more, high interest rates are making local assets more attractive. Latin America’s high yields compared with peers and relatively cheap local stock markets continue to attract foreign account inflows. Global rotation from growth stocks into value stocks continue to boost performance Latin America and considering the Federal Reserve’s pace of interest rate rises, this may keep investors away from growth stocks for now. 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 May 2022.
22 June 2022
To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla
