BlackRock Latin American Investment Trust Plc - Portfolio Update
PR Newswire
London, January 27
The information contained in this release was correct as at 31 December 2020. 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 31 December 2020 and unaudited.
Performance at month end with net income reinvested
| One month % | Three months % | One year % | Three years % | Five years % | |
| Sterling: | |||||
| Net asset value^ | 10.1 | 30.8 | -17.2 | -5.4 | 66.6 |
| Share price | 11.3 | 32.9 | -12.1 | 2.0 | 78.4 |
| MSCI EM Latin America (Net Return)^^ | 9.3 | 27.5 | -16.5 | -6.4 | 65.4 |
| US Dollars: | |||||
| Net asset value^ | 12.8 | 38.3 | -14.6 | -4.5 | 54.4 |
| Share price | 13.9 | 40.5 | -9.3 | 3.0 | 65.3 |
| MSCI EM Latin America (Net Return)^^ | 11.9 | 34.8 | -13.8 | -5.4 | 53.4 |
^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. Historically the benchmark data for the Company has always been stated on a Gross basis. However, as disclosed in the Company's Interim Report for the six months ended 30 June 2018, it is the Board's intention to monitor the Company's performance with reference to the NR version of the benchmark. For transparency both sets of benchmark data have been provided.
Sources: BlackRock, Standard & Poor's Micropal
At month end
| Net asset value - capital only: | 431.10p |
| Net asset value - including income: | 436.20p |
| Share price: | 404.50p |
| Total assets#: | £183.8m |
| Discount (share price to cum income NAV): | 7.3% |
| Average discount* over the month - cum income: | 10.7% |
| Net gearing at month end**: | 7.4% |
| Gearing range (as a % of net assets): | 0-25% |
| Net yield##: | 4.2% |
| 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 4.2% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 23.06 cents per share) and using a share price of 552.93 US cents per share (equivalent to the sterling price of 404.50 pence per share translated in to US cents at the rate prevailing at 31 December 2020 of $1.36687 dollars to £1.00).
2020 Q1 interim dividend of 4.59 cents per share (paid on 20 May 2020). 2020 Q2 interim dividend of 5.57 cents per share (paid on 11 August 2020).
2020 Q3 interim dividend of 5.45 cents per share (paid 09 November 2020).
2020 Q4 Final dividend of 7.45 cents per share (payable on 08 February 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 2019.
| Geographic Exposure | % of Total Assets | % of Equity Portfolio * | MSCI EM Latin America Index |
| Brazil | 63.0 | 62.9 | 64.6 |
| Mexico | 25.4 | 25.4 | 21.9 |
| Chile | 8.7 | 8.7 | 6.3 |
| Argentina | 3.0 | 3.0 | 1.6 |
| Peru | 0.0 | 0.0 | 3.0 |
| Colombia | 0.0 | 0.0 | 2.6 |
| Net current liabilities (inc. fixed interest) | -0.1 | 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 7.3% of the Company's net asset value.
| Sector | % of Equity Portfolio* | % of Benchmark* |
| Financials | 27.0 | 25.8 |
| Materials | 26.0 | 20.7 |
| Energy | 9.2 | 9.7 |
| Consumer Discretionary | 8.8 | 6.4 |
| Industrials | 7.9 | 6.7 |
| Communication Services | 6.4 | 6.1 |
| Real Estate | 3.8 | 0.9 |
| Health Care | 3.7 | 2.2 |
| Consumer Staples | 3.5 | 14.1 |
| Information Technology | 2.0 | 1.8 |
| Utilities | 1.7 | 5.6 |
| ----- | ----- | |
| Total | 100.0 | 100.0 |
| ===== | ===== |
*excluding net current assets & fixed interest
Company | Country of Risk | % of Equity Portfolio | % of Benchmark |
| Petrobras: | |||
| Brazil | 6.0 | 3.3 |
| Brazil | 3.2 | 4.2 |
| Banco Bradesco - ADR | Brazil | 8.5 | 4.7 |
| Vale - ADR | Brazil | 8.1 | 10.0 |
| B3 | Brazil | 4.9 | 3.9 |
| America Movil - ADR | Mexico | 4.2 | 4.0 |
| Grupo Mexico | Mexico | 3.8 | 2.1 |
| Walmart de Mexico y Centroamerica | Mexico | 3.5 | 2.4 |
| Suzano | Mexico | 3.3 | 1.4 |
| Quimica Y Minera - ADR | Chile | 3.2 | 0.9 |
| Cemex | Mexico | 3.1 | 1.3 |
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;
For the month of December 2020, the Company's NAV returned 10.1%1 with the share price moving 11.3%1. The Company's benchmark, the MSCI EM Latin America Index, returned 9.3%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).
Latin American (LatAm) equities performed strongly in December, out-performing the developed and emerging markets. All LatAm countries posted positive performance, with Brazil and Colombia leading the rise. LatAm stocks rose on optimism over the global rollout of the COVID-19 vaccine and a slide in the US Dollar.
Stock selection in Mexico contributed the most to relative performance over the period, while allocation in Colombia detracted most from relative returns . An overweight position in Brazilian bank, Banco Bradesco, contributed the most to relative performance as the bank's earnings should be positively impacted following the improvement in the global outlook with the positive progress on Brazil's macro scenario. The portfolio's lack of exposure to the Mexican multinational beverage and retail company, Fomento Economico Mexicano, also added to relative performance as the stock underperformed the benchmark due to increased mobility restrictions in Mexico. Conversely, an off-benchmark holding in Afya, a Brazilian medical education group, was the top detractor on a relative basis as the stock gave back gains following a strong period of outperformance (year to date). An overweight position in Sociedad Quimica y Minera de Chile, a Chilean Lithium company, also weighed on returns during December. Despite the short-term headwind to relative performance, the stock appreciated in value by more than 80% in 2020 and remains well positioned to be a low-cost leader in lithium production, an industry that should continue to see strong demand as the global expansion of the market for electronic vehicles gains pace.
Over the month we added to the Argentinian IT and software development company, Globant, on the back of attractive valuations (given recent relative underperformance). We believe that the company has earnings upside potential from a strong pipeline of demand for its products. We initiated a position in the Brazilian bank, Banco BTG Pactual, on expectations of strong earnings growth relative to traditional banks (given the company's market share gains and the growth in asset management and wealth management industries). We reduced exposure to the Brazilian e-commerce company, B2W Companhia, due to pressure on market share and strong competition. We sold our holding in the Brazilian petroleum distributor, Petrobras Distribuidora, as we fear that the valuation is mostly fair, based on our view of an increasingly competitive industry and falling marginal returns. The portfolio ended the month being overweight to Mexico and Chile, whilst being underweight to Peru and Colombia. At the sector level, we are overweight materials and real estate; and underweight consumer staples and utilities.
As we have seen, COVID-19 has devastated the global economy in 2020, with LatAm hit especially hard. As we look in to 2021 we see politics and vaccine hopes as catalysts for a reflation trade. Despite the strong fourth quarter performance of LatAm equities, the region remains cheaper than developed markets and emerging markets on both a forward P/E (price to earning) basis and trailing P/BV (price to book value) basis. We are optimistic on returns for Latin American equities going forward, given the prospect for low global interest rates to persist over the medium-term, economic recovery in 2021 and anticipation of a weaker US Dollar environment favouring LatAm currencies. Furthermore, LatAm equities have benefited from a recent global value rotation in the market, which we expect to continue into the new year. Higher raw material prices should also provide a tailwind for LatAm given the high level of commodity exports across major economies in the region. Focusing on Brazil, more cyclical and credit-dependent sectors appear to be recovering faster. This sectoral dynamic suggests that the Brazillian Central Bank's liquidation and risk reduction measures have, thus far, not only prevented an explosion in defaults but have also allowed banks to cushion the negative impacts of the crisis, with credit playing an important anti-cyclical roll. In the long-run, to consolidate this recovery, we believe that stringent fiscal discipline is needed to limit the fiscal legacy of emergency measures.
1Source: BlackRock, as of 31 December 2020.
27 January 2021
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.
