BlackRock Latin American Investment Trust Plc - Portfolio Update

The information contained in this release was correct as at 30 November 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 November 2024 and unaudited.
 

Performance at month end with net income reinvested
 

 

^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

 

#Total assets include current year revenue.

##The yield of 7.5% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 27.83 cents per share) and using a share price of 369.88 US cents per share (equivalent to the sterling price of 291.00 pence per share translated in to US cents at the rate prevailing at 30 November 2024 of $1.271 dollars to £1.00).

  

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 (Paid on 08 August 2024)

2024 Q3 Interim dividend of 6.26 cents per share (Paid 08 November 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.

  

 

^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 4.3% of the Company’s net asset value.

 

*excluding net current assets & fixed interest

 

Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;

 

The Company’s NAV fell -7.1% in November, underperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -4.4% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.1

 

November was another challenging month for Emerging Markets as the MSCI Emerging Markets Index pulled back -3.7% after Donald Trump won his bid for a second presidential term. Latin America (-5.7%) was the worst performing region within Emerging Markets, driven by weakness in Brazil (-7.2%) as the market was disappointed with the magnitude of the fiscal cuts announced, resulting in the BRL reaching an all-time low of 6.10 to the USD.  Mexico was down by -3.6%, as political uncertainty surrounding relations with the US remained an overhang for the market.

 

At the portfolio level, security selection in Mexico and an off-benchmark exposure to Argentina, were the key positive contributors to performance. On the other hand, stock picking in Brazil detracted and having no exposure to Peru hurt at the margin.

 

From a security lens, an underweight to Brazilian digital banking platform provider, NU Holdings, was the biggest contributor to returns over the month. Pinfra, a Mexican highway operator, was a strong performer after delivering a positive set of third quarter results which showed a 20% EBITDA beat, mainly driven by lower-than-expected operating expenses. Chilean brewer, CCU, also helped performance as did our exposure to Mexican cement producer, Cemex. We believe that Cemex will be less impacted by potential US tariffs on cement once Donald Trump takes office, as they have operations in the US and do not rely on exports from Mexico.

 

On the flipside, Brazilian healthcare operator, Hapvida, continued to weigh on returns in November as third quarter results missed consensus estimates. We continue to hold the stock as the company delivered decent cash flow generation. Another detractor was Brazilian investment management platform, XP. The company reported a profit before tax miss, largely related to cost pressures. We think costs should go down quarter-on-quarter and foresee the company's revenue base increasing as rates go up. Lojas Renner, the Brazilian retailer also detracted. Despite reporting generally strong results, the company missed consensus estimates, which led to a drop in the stock price.

During November we took profits and exited engineering solutions provider, Seatrium, after the stock had performed exceptionally well. We shifted our industrials exposure in Brazil, by exiting truck leasing company, Vamos, and buying Lozaliza on the view that the former is more exposed to higher interest rates in Brazil. We also topped up our holding in property developer, Cyrela. This is a company with a strong balance sheet that we believe can take advantage of a down cycle to buy cheap land.

 

Mexico is the largest portfolio overweight as of November end. Brazil is our second largest overweight. On the other hand, the largest underweight is Peru. The second largest portfolio underweight is Chile.

 

Outlook

 

We remain optimistic about the outlook for Latin America. The start of the Federal Reserve's easing cycle should be supportive for Latin America. Whilst the index performance has been poor over the past year, we maintain conviction that fundamentals remain robust and that stronger growth, now coupled with greater policy flexibility, should result in reduced risk premia. 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 , in time,  an increase in the equity  allocation of investors across the region.

 

In Brazil, whilst, contra to our initial thesis, the central bank embarked on a tightening phase to get ahead of anticipated inflation, there are plenty of interesting bottom-up opportunities within the market and earnings have been strong across sectors. We have reduced our exposure to companies with leverage, as there is a risk that interest rates in Brazil will stay elevated for some time.  We believe these very high interest rates will slow down the economy and reduce inflation, which, while above target, is lower than that experienced by Brazil for most of the last 30 years. We believe that the fiscal impulse in 2025 will be lower than in 2024 as the government itself is starting to understand the importance of fiscal restraint.

 

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 created a lot of volatility for Mexican financial assets, with the Peso depreciating significantly. Investors are concerned that the landslide win of president Sheinbaum and the Morena party will result in reduced checks and balances for the government. And the passing of the controversial judicial reform in early September highlighted this issue. While we are certainly concerned about the implications of the reform for judicial independence, we think that the government will remain relatively pragmatic and fiscally prudent, as it was during AMLO’s (Andrés Manuel López Obrador) term. We have therefore used the market correction to add to multiple positions.

 

1Source: BlackRock, as of 30 November 2024.

 

23 December 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.