The
information contained in this release was correct as at
30 June 2024.
Information on
the Company’s up to date net asset values can be found on the
London Stock Exchange Website at
https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.
BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI -
UK9OG5Q0CYUDFGRX4151)
All
information is at
30 June
2024 and
unaudited.
Performance
at month end with net income reinvested
|
One
month
%
|
Three
months
%
|
One
year
%
|
Three
years
%
|
Five
years
%
|
Sterling:
|
|
|
|
|
|
Net
asset value^
|
-8.2
|
-16.1
|
-13.9
|
2.1
|
-11.5
|
Share
price
|
-6.0
|
-12.4
|
-9.3
|
2.8
|
-9.6
|
MSCI
EM Latin America
(Net
Return)^^
|
-5.4
|
-12.3
|
-5.0
|
12.4
|
1.4
|
US
Dollars:
|
|
|
|
|
|
Net
asset value^
|
-8.9
|
-16.1
|
-14.4
|
-6.6
|
-12.1
|
Share
price
|
-6.7
|
-12.4
|
-9.8
|
-6.0
|
-10.2
|
MSCI
EM Latin America
(Net
Return)^^
|
-6.1
|
-12.2
|
-5.6
|
2.9
|
0.7
|
^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:
|
380.34p
|
Net
asset value - including income:
|
387.73p
|
Share
price:
|
346.00p
|
Total
assets#:
|
£128.8m
|
Discount (share
price to cum income NAV):
|
10.8%
|
Average discount*
over the month – cum income:
|
9.7%
|
Net
Gearing at month end**:
|
11.4%
|
Gearing range (as
a % of net assets):
|
0-25%
|
Net
yield##:
|
6.5%
|
Ordinary shares
in issue(excluding 2,181,662 shares held in treasury):
|
29,448,641
|
Ongoing
charges***:
|
1.13%
|
#Total assets
include current year revenue.
##The
yield of 6.9% is calculated based on total dividends declared in
the last 12 months as at the date of this announcement as set out
below (totalling 28.59 cents per
share) and using a share price of 437.38 US cents per share
(equivalent to the sterling price of 346.00
pence per share translated in to US cents at the rate
prevailing at 30 June 2024 of
$1.264 dollars to £1.00).
2023
Q3 Interim dividend of 7.02 cents per
share (Paid on 09 November
2023)
2023
Q4 Interim dividend of 8.05 cents per
share (Paid on 09 February
2024)
2024
Q1 Interim dividend of 7.39 cents per
share (Paid on 13 May
2024)
2024
Q2 Interim dividend of 6.13 cents per
share (To be paid on 13 August
2024)
*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.
***
The Company’s ongoing charges are calculated as a percentage of
average daily net assets and using the management fee and all other
operating expenses excluding finance costs, direct transaction
costs, custody transaction charges, VAT recovered, taxation and
certain non-recurring items for the year ended 31 December 2023.
Geographic Exposure
|
% of Total Assets
|
% of Equity Portfolio *
|
MSCI EM Latin America Index
|
Brazil
|
58.4
|
59.1
|
58.8
|
Mexico
|
31.0
|
31.3
|
29.5
|
Chile
|
3.8
|
3.8
|
6.1
|
Argentina
|
2.2
|
2.2
|
0.0
|
Colombia
|
2.0
|
2.1
|
1.4
|
Panama
|
1.4
|
1.5
|
0.0
|
Peru
|
0.0
|
0.0
|
4.2
|
Net
current Assets (inc. fixed interest)
|
1.2
|
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 assets figure shown in the table above therefore
excludes bank overdrafts equivalent to 12.8% of the Company’s net
asset value.
Sector
|
% of Equity Portfolio*
|
% of Benchmark*
|
Financials
|
26.2
|
25.3
|
Consumer
Staples
|
16.5
|
16.5
|
Industrials
|
15.4
|
10.5
|
Materials
|
12.4
|
18.3
|
Consumer
Discretionary
|
10.4
|
1.6
|
Energy
|
10.1
|
13.7
|
Health
Care
|
4.0
|
1.5
|
Real
Estate
|
2.6
|
1.1
|
Information
Technology
|
2.2
|
0.6
|
Communication
Services
|
0.2
|
4.2
|
Utilites
|
0.0
|
6.7
|
|
-----
|
-----
|
Total
|
100.0
|
100.0
|
|
=====
|
=====
|
|
|
|
*excluding
net
current assets & fixed interest
Company
|
Country of Risk
|
% of
Equity Portfolio
|
% of
Benchmark
|
Petrobrás:
|
Brazil
|
|
|
Equity
|
|
2.1
|
|
Equity
ADR
|
|
5.6
|
4.9
|
Preference Shares
ADR
|
|
2.4
|
6.0
|
Vale
|
Brazil
|
|
|
ADS
|
Brazil
|
7.4
|
|
Equity
|
Brazil
|
0.9
|
7.0
|
Grupo
Financiero Banorte
|
Mexico
|
7.2
|
3.7
|
Walmart de México
y Centroamérica
|
Mexico
|
5.8
|
3.3
|
Banco
Bradesco:
|
Brazil
|
|
|
Equity
ADR
|
|
3.9
|
0.6
|
Preference
Shares
|
|
1.7
|
2.2
|
B3
|
Brazil
|
4.4
|
1.9
|
Grupo
Aeroportuario del Pacifico – ADS
|
Mexico
|
4.1
|
1.1
|
Itaú
Unibanco – ADR
|
Brazil
|
3.3
|
5.2
|
Hapvida
Participacoes
|
Brazil
|
3.1
|
0.6
|
Lojas
Renner
|
Brazil
|
2.9
|
0.4
|
|
Commenting
on the markets, Sam Vecht and
Christoph Brinkmann, representing
the Investment Manager noted;
The
Company’s NAV returned -8.2% in June, underperforming the
benchmark, MSCI Emerging Marekets Latin America Index, which
returned -5.4% on a net basis over the same period. All performance
figures are in sterling terms with dividends
reinvested.1
Emerging Markets
(+3.9%) outperformed Developed Markets (+2.0%) in June.
Latin America (-6.1%) lagged the
rest of Emerging Markets, and was the only region to post negative
returns with all markets in the red. Argentina (-10.7%) and Mexico (-10.6) were the main drivers of this
decline, where the underperformance of the latter was driven by
political concerns post-election. Brazil was the best performer with a -3.7%
month on month return.
At
the portfolio level, our exposure to a non-domestic IT services
company in Argentina and a
precious metals exposure in Ecuador were the key positive contributors to
performance. On the other hand, stock picking in Brazil and Mexico impacted performance during the month.
In addition, it is worth highlighting that the index performance
has been quite weak during the month of June. Since the Company
usually employs gearing, one should expect the portfolio to
underperform during index downturns (and outperform during
upturns).
From
a security lens, an off-benchmark holding in IT services company,
Globant was the largest contributor to returns. While the company
is domiciled in Argentina, it
largely generates revenues from US tech spending and results from
peers suggest that said spending is holding up well. Not owning
Mexican cement producer Cemex and our underweight position to
Mexican mining company, Grupo Mexico also contributed to
performance. The Mexican market declined more broadly on concerns
around less checks and balances following Sheinbaum's landslide win
in the elections in early June. Another contributor over the period
was our overweight position in Brazilian logistics company Rumo.
The company's May 2024 volumes
surprised to the upside which was a positive for the
stock.
On
the flipside, an overweight position in Mexican airport operator,
Grupo Aeroportuario del Pacífico (GAPB) was the biggest detractor
in June on the back of Sheinbaum's land slide win and market
concerns around the resulting strong majority. Another detractor
during the month was our overweight position in Brazilian
supermarket chain, Assai. This is a highly levered company whose
performance has been impacted by the delay in the rate cutting
cycle from the Brazilian Central Bank. A lack of exposure to
Brazilian electric equipment firm, WEG also hurt returns. WEG’s
share price rose on the back of news of Robert Bosch's takeover of Whirlpool, for which
WEG is a key supplier. As an exporter, the depreciation of the
Brazilian Real likely also helped the share price.
We
made few changes to the portfolio in June. We exited our position
in Lundin Gold as the investment
thesis had largely played out. This stock has been among the top
contributors in the portfolio year-to-date. We rotated capital
within Brazil, from beverage
company Ambev to CCR, a road and transport infrastructure operator
in Brazil, to reflect analyst
conviction. In Mexico, we took
advantage of the significant sell-off following the election and
topped up our holding in Banorte. We do not believe that the
election outcome will have a meaningful impact on the earnings of
Banorte.
Brazil is the largest portfolio overweight as
of the end of June. Mexico is our
second largest overweight. On the other hand, we remain underweight
in Peru due to its political and
economic uncertainty. The second largest portfolio underweight is
Chile.
Outlook
We
remain optimistic about the outlook for Latin America. Central banks have been
proactive in increasing interest rates to help control inflation,
which has fallen significantly across the region. As such we have
started to see central banks beginning to lower interest rates,
which should support both economic activity and asset prices. In
addition, the whole region is benefitting from being relatively
isolated from global geopolitical conflicts. We believe that this
will lead to both an increase in foreign direct investment and an
increase in allocation from investors across the
region.
Brazil is the highlight of this thesis, with
the central bank having already cut the policy rate considerably.
We still anticipate further reductions, particularly if the U.S.
Federal Reserve starts to reduce its own interest rate. During the
month of June, investors have become increasingly concerned about
the fiscal trajectory of Brazil.
This was partially sparked by a higher than expected fiscal deficit
in the month of June. After carefully examining the data, we
believe that the market is overreacting. The fiscal expenditure
year-to-date looks artificially high because the government has
decided to accelerate some of the spending that was planned over
the full year into 1H24. We therefore expect better fiscal results
over the next few months, which should help in bringing both the
currency and the interest rates back down.
We
remain positive on the outlook for the Mexican economy as it is a
key beneficiary of the friend-shoring of global supply chains.
Mexico remains defensive as both
fiscal and the current accounts are in order. The outcome of the
presidential elections in early June has created a lot of
volatility for Mexican financial assets, with the Peso depreciating
significantly. Investors are concerned that the landslide win of
president-elect Sheinbaum and the Morena party will result in
reduced checks and balances for the government and potentially
detrimental judicial reforms. We have visited Mexico in the week after the election to meet
with investors, business owners and political advisors. Our
conclusion from that trip is that we believe the government will
remain relatively pragmatic and fiscally prudent, as it has been
during Andrés Manuel López Obrador’s presidency . We have therefore
used the market correction to add to certain positions.
We
continue to closely monitor the political and economic situation in
Argentina, after libertarian
Javier Milei unexpectedly won the presidential elections in
November. Milei is facing a very difficult situation, with
inflation around 270% year-on-year, FX reserves depleted and
multiple economic imbalances. To further gauge sentiment on the
ground, we travelled to the country in January. The trip further
instilled our cautious view on the economic outlook for the
country, and we see no fundamental reasons as to why we would want
to buy this market now. We have become incrementally more cautious
on Argentina over the past month,
as the weakening of the informal exchange rate suggests that the
official exchange rate might be overvalued. Therefore we see the
risk of another exchange rate devaluation, which could reignite
inflationary pressures.
We
acknowledge the strengths of the data in the United States at the beginning of the
year, but we believe that, ultimately, the domestic economic
outlook in the Latin American countries will be the key driver of
local interest rates. We therefore maintain conviction in the
portfolio’s positioning in rate-sensitive domestic stocks. In
addition, our view of a softer US labor market and further
disinflation seems to be playing out, as evidenced by the recent
rise in jobless claims and the relatively benign inflation data in
May and June. As a result, the pressure from higher rates in the US
is easing.
1Source:
BlackRock, as of 30 June
2024.
19 July 2024
ENDS
Latest
information is available by typing www.blackrock.com/uk/brla on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on
Topic 3 (ICV terminal).
Neither the
contents of the Manager’s website nor the contents of any website
accessible from hyperlinks on the Manager’s website (or any other
website) is incorporated into, or forms part of, this
announcement.