Disclaimer
This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
- BlackRock Latin American (BRLA) is positioned to benefit from what the managers, Sam Vecht and Cristoph Brinkmann, view as an encouraging macro outlook.
- Central banks across the region have begun to cut rates, which is resulting in improved economic activity.
- The managers argue both of the largest markets in their region, Brazil and Mexico, look attractive at this point in time, while the region’s markets are generally cheap versus their international peers and their own historical valuations.
- They note that Brazil’s economy is performing well, despite some concerns that public spending might reignite inflation. Fiscal discipline is a key thing to watch for.
- The managers have rebuilt positions in Mexico following a post-election sell-off. They argue there are strong economic factors supporting the economy and attractive valuations.
- On a medium to long-term view, the managers argue the Latin American region continues to benefit from being able to deal politically and economically with both the USA and China, as tensions remain high between the two largest economies.
- BRLA pays a quarterly dividend from capital where necessary. It is fixed as 1.25% of the NAV at the end of each calendar quarter, meaning an annualised 5%. Thanks to the discount the shares are trading at, the prospective yield is higher.
- Over the course of 2024, the discount has widened from c. 12% to c. 16% as Latin American markets have retreated following a very strong 2023.
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