Portfolio Update

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at31 August 2019 and unaudited.

Performance at month end with net income reinvested

	One month	Three months	One  year	Three years	Five years
Sterling:
Net asset value^	-11.6	-2.3	17.5	26.3	9.4
Share price	-16.6	-1.5	21.1	28.1	11.2
MSCI EM Latin America (Net Return)^^	-7.6	1.1	16.2	26.6	10.7
US Dollars:
Net asset value^	-12.1	-5.7	10.0	17.2	-19.9
Share price	-17.1	-4.8	13.4	18.9	-18.6
MSCI EM Latin America (Net Return)^^	-8.1	-2.4	8.9	17.7	-18.8

^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:	512.38p
Net asset value – cum income:	515.52p
Share price:	447.00p
Total Assets#:	£223.5m
Discount (share price to cum income NAV):	13.3%
Average discount* over the month – cum income:	9.9%
Net gearing at month end**:	9.5%
Gearing range (as a % of net assets):	0-25%
Net yield##:	6.2%
Ordinary shares in issue (excluding 2,181,662 shares held in treasury):	39,259,620
Ongoing charges***:	1.0%

#Total assets include current year revenue.

##The yield of 6.2% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 33.69 cents per share) and using a share price of 544.39 US cents per share (equivalent to the sterling price of 447.00 pence per share translated in to US cents at the rate prevailing at 31 August 2019 of $1.2179 dollars to £1.00).

2018 Q3 interim dividend of 7.85 cents per share (paid on 9 November 2018)
2018 Q4 interim dividend of 8.13 cents per share (paid on 8 February 2019)
2019 Q1 interim dividend of 8.56 cents per share (paid on 17 May 2019)
2019 Q2 interim dividend of 9.15 cents per share (paid on 16 August 2019)

*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 2018.
 

Geographic Exposure	% of Total Assets^	% of Equity Portfolio *		MSCI EM Latin America Index
Brazil	66.6	67.1		62.8
Mexico	22.6	22.8		21.2
Argentina	4.3	4.4		1.5
Chile	2.2	2.2		7.8
Colombia	2.1	2.2		3.5
Panama	1.3	1.3		0.0
Peru	0.0	0.0		3.2
Net current assets (inc. fixed interest)	0.9	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 10.5% of the Company’s net asset value.

Sector	% of Equity Portfolio *	% of Benchmark
Financials	27.9	33.9
Energy	13.7	9.7
Consumer Staples	13.3	15.9
Materials	11.3	12.6
Industrials	8.4	6.3
Utilities	6.1	6.0
Communication Services	5.7	6.4
Real Estate	5.0	1.4
Consumer Discretionary	4.2	5.7
Health Care	3.0	1.2
Information Technology	1.4	0.9
	-----	-----
Total	100.0	100.0
	-----	-----

*excluding net current assets & fixed interest

 

Ten Largest Equity Investments (in percentage order)

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Petrobras	Brazil	10.2	7.4
Itau Unibanco	Brazil	8.7	6.3
Banco Bradesco	Brazil	5.7	6.5
AmBev	Brazil	5.0	3.4
Banco do Brasil	Brazil	4.1	1.5
Grupo Financiero Banorte	Mexico	4.1	2.2
FEMSA	Mexico	4.1	2.8
America Movil	Mexico	4.0	3.9
B3	Brazil	3.2	3.6
Rumo Logística Operadora Multimodal	Brazil	3.1	0.9

Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;

For the month of August 2019, the Company’s NAV returned -11.6% with the share price moving -16.6%¹. The Company’s benchmark, the MSCI EM Latin America Index, was down -7.6% (net basis) (all performance figures are in Sterling terms with dividends reinvested).

Mexico was the top performing country in the region, despite still ending the month in negative territory, as the market was partially supported by indications that Banxico will begin an easing cycle to help incentivise a pick-up in activity. As a result, Mexican stock selection was the month’s top contributor. Real Estate investment firm, Fibra Uno and property management name, Vesta, were among the best performers, the latter of which continued to see strong leasing activity through the second quarter of 2019. Our overweight position to lender, Banorte, also benefitted the portfolio after booking a resilient quarter on healthy ROAE (return on average equity) and a marginally higher NIM (net interest margin) projection. Though our overweight position to Brazil detracted from performance in August, as the currency sold off -8.1%, healthcare names such as Intermedica and Qualicorp, remained resilient. An underweight to Vale also benefitted relative performance.

On the other hand Argentina was down by over 50% in August (in US Dollar terms), after the national primary election showed unexpectedly strong support for the opposition party of Alberto Fernandez and Cristina Kirchner. As a result, overweights to Pampa, energy firm YPF and lender, Banco Macro, were among the largest detractors during the month alongside a collapse in the equity and currency markets. An off-benchmark position in Brazilian telecom, Oi, was also among the month’s worst performing names as expected reforms remained stalled.

We notably reduced exposure to Argentina in August on concerns that the path of economic normalisation would be abandoned under a new government. Specifically, we exited Pampa, while significantly reducing exposure to YPF and Banco Macro. On the other hand, we moved some exposure in Brazil, switching consumer exposure from retailer, Lojas Americanas to B2W Digital. We also increased exposure to the healthcare space, initiating positions in service-oriented names, Notre Dame Intermedica and Qualicorp. In Mexico, we increased our America Movil position to an overweight on cheap valuations and positive operating trend momentum. 

Brazil remains our largest overweight given the increasing prospects for positive structural economic reforms. Expectations for gradual improvement in economic activity, monetary easing and advancements in social security reform remain focal points for our conviction. We maintain a cautious outlook on Mexican equities as the economy slows and domestic policy uncertainty continues to lead to subdued business confidence. In Peru, we are underweight as we see negative newsflow on politics as President Vizcarra’s approval ratings continue to deteriorate. We remain underweight on Colombia as we see the latest relaxation of the fiscal rule casting a shadow on the country’s commitment to fiscal stability. We have also recently begun reducing our underweight position in Chilean equities due to increasingly attractive valuations. Finally, President Macri’s primary round loss to populist opposition candidate, Alberto Fernandez, was much wider than expected, casting increased uncertainty over what the government will look like in the second half of the year. As a result, we have been selling down Argentine exposure given the view that the path of economic normalisation is more likely to be abandoned under a new government.

Source: ¹BlackRock as at 31 August 2019

26 September 2019

ENDS

Latest information is available by typing www.blackrock.co.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.