BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.
All information is at 31 December 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^ | 5.2 | -4.6 | -11.7 | -17.0 | -1.4 |
| Share price | 6.4 | -0.2 | -11.0 | -8.3 | 8.8 |
| MSCI EM Latin America (Net Return)^^ | 3.5 | -3.1 | -7.2 | -12.5 | -1.8 |
| US Dollars: | |||||
| Net asset value^ | 7.7 | -4.2 | -12.5 | -11.6 | 8.1 |
| Share price | 8.9 | 0.3 | -11.8 | -2.4 | 19.3 |
| MSCI EM Latin America (Net Return)^^ | 5.9 | -2.7 | -8.1 | -6.9 | 7.6 |
^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: | 359.19p |
| Net asset value – including income: | 366.49p |
| Share price: | 340.50p |
| Total assets#: | £156.4m |
| Discount (share price to cum income NAV): | 7.1% |
| Average discount* over the month – cum income: | 9.1% |
| Net gearing at month end**: | 8.9% |
| Gearing range (as a % of net assets): | 0-25% |
| Net yield##: | 6.0% |
| 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 6.0% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 27.56 cents per share) and using a share price of 461.19 US cents per share (equivalent to the sterling price of 340.50 pence per share translated in to US cents at the rate prevailing at 31 December 2021 of $1.3534 dollars to £1.00).
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 (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 (payable on 08 February 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 2020.
| Geographic Exposure | % of Total Assets | % of Equity Portfolio * | MSCI EM Latin America Index |
| Brazil | 55.3 | 55.2 | 59.0 |
| Mexico | 30.8 | 30.8 | 30.2 |
| Chile | 5.6 | 5.6 | 5.5 |
| Peru | 3.6 | 3.5 | 2.8 |
| Argentina | 2.8 | 2.8 | 0.0 |
| Panama | 2.1 | 2.1 | 0.0 |
| Colombia | 0.0 | 0.0 | 2.5 |
| Net current liabilites (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 liabilities figure shown in the table above therefore excludes bank overdrafts equivalent to 8.7% of the Company’s net asset value.
| Sector | % of Equity Portfolio* | % of Benchmark* |
| Financials | 24.9 | 22.1 |
| Materials | 21.3 | 23.2 |
| Consumer Staples | 11.3 | 16.4 |
| Communication Services | 10.0 | 9.3 |
| Industrials | 8.0 | 7.0 |
| Energy | 7.5 | 10.8 |
| Health Care | 5.3 | 2.4 |
| Real Estate | 3.7 | 0.6 |
| Consumer Discretionary | 3.6 | 3.8 |
| Information Technology | 2.8 | 0.5 |
| Utilities | 1.6 | 3.9 |
| —– | —– | |
| Total | 100.0 | 100.0 |
| ===== | ===== |
*excluding net current liabilities & fixed interest
Company | Country of Risk | % of Equity Portfolio | % of Benchmark |
| Vale – ADS | Brazil | 7.6 | 10.8 |
| Petrobrás – ADR: | Brazil | ||
| Equity | 4.6 | 3.9 | |
| Preference Shares | 2.9 | 4.6 | |
| América Movil – ADR | Mexico | 7.1 | 6.8 |
| Banco Bradesco – ADR | Brazil | 5.3 | 3.9 |
| B3 | Brazil | 4.6 | 2.3 |
| Walmart de México y Centroamérica | Mexico | 4.5 | 3.7 |
| Grupo Financiero Banorte | Mexico | 4.5 | 3.2 |
| Cemex – ADR | Mexico | 3.6 | 1.9 |
| Grupo Aeroportuario | Mexico | 3.6 | 1.8 |
| Credicorp | Peru | 3.5 | 1.6 |
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;
For the month of December 2021, the Company’s NAV returned 5.2% with the share price moving 6.4%. The Company’s benchmark, the MSCI EM Latin America Index, returned 3.5% 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 Mexico and Brazil leading the rise.
Security selection in Mexico contributed the most to relative performance over the period while security selection in Brazil detracted most from relative returns. An off-benchmark holding in Argentinian IT and software development company, Globant, was the top contributor to performance as the company has seen rapid revenue growth with industry leading margins through a strong set of accelerators that leverage AI (Artificial Intelligence) and other technologies to reinvent key aspects of organizations. An overweight position in Mexican airport operator, Grupo Aeroportuario del Pacifico, also benefitted the Company as the stock has outperformed following air traffic recovery. On the other hand, an overweight position in Rede D’Or, a Brazilian healthcare company, detracted most from relative performance as investors were concerned about rising inflation in Brazil and the impact it could have on margins for the hospital group. An off-benchmark holding in Brazilian electric services company, Neoenergia, also weighed on relative returns as the stock was sold off along with other rate-sensitive sectors in Brazil.
Over the month we added to América Movil, a Mexican telecommunications company, as the company has been experiencing strong profitability allowing for faster deleveraging of their balance sheet. We reduced exposure to Falabella, a Chilean department store and sold our holding in Chilean chemicals company, Sociedad Química y Minera de Chile, to reduce exposure to political risk ahead of the Chilean presidential election. The portfolio ended the period being overweight to Argentina and Mexico, whilst being underweight to Colombia. At the sector level, we are overweight financials and real estate, and underweight consumer staples and energy.
It has been a tough period for Latin America, with many countries hit hard by the COVID-19 crisis. However, we believe there are arguments to be made for better times ahead for the region as the world rebuilds after the pandemic and Latin America could be considered as a beneficiary of recovery in the global economy. As the region rebuilds, the Latin countries will have some important tailwinds. Perhaps the most significant are high commodity prices. Vast stimulus in the US and economic recovery across the world has pushed up demand for commodities after a period of tight supply. Global governments have ambitious, commodity-heavy infrastructure plans, particularly for green energy development. Latin America is one of the most abundant regions in the world for lithium, iron ore and copper with some of the longest-life reserves at a low cost in Brazil, Chile, and Peru. Despite this positive external backdrop, there are also broader risk factors that could weigh on regional economic growth. Across Latin America, a growing middle class is seeing domestic consumption pressured from rising inflation and increasing domestic interest rates. Latin American economies were boosted throughout the pandemic for the most part by expansionary monetary and fiscal policies. This has led to a rapid near-term rebound in demand given the reopening of economies at a time where rising energy costs, low inventories and supply chain issues have led to inflation exceeding expectations across the region. Central banks have aggressively reacted by hiking domestic interest rates to tame rising inflation. The impact of rising domestic rates will weigh on growth prospects, at the margin, but could be offset by continued loose fiscal policy. Over the next 12 months we will see presidential elections in Colombia and Brazil and one of the biggest debates is the amount of government spending to continue to support development. The outcome of these debates will have profound impact on growth going forward. Against this challenging backdrop, we see Latin American equities as already pricing in a great deal of risk factors as a number of stocks and country indices are already trading at discounted valuations in both absolute and relative terms.
1Source: BlackRock, as of 31 December 2021.
To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla
