Portfolio Update

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at30 November 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^	-3.5	-1.5	3.0	23.3	21.5
Share price	-1.9	1.5	11.2	30.2	25.8
MSCI EM Latin America (Net Return)^^	-4.1	-3.2	4.2	19.9	22.3
US Dollars:
Net asset value^	-3.6	4.7	4.4	27.6	0.3
Share price	-1.9	7.9	12.8	34.7	3.8
MSCI EM Latin America (Net Return)^^	-4.1	2.8	5.6	24.2	1.1

^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:	499.83p
Net asset value – cum income:	501.72p
Share price:	447.50p
Total Assets#:	£217.6m
Discount (share price to cum income NAV):	10.8%
Average discount* over the month – cum income:	10.6%
Net gearing at month end**:	9.9%
Gearing range (as a % of net assets):	0-25%
Net yield##:	5.9%
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 5.9% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 33.87 cents per share) and using a share price of 578.84 US cents per share (equivalent to the sterling price of 447.50 pence per share translated in to US cents at the rate prevailing at 30 November 2019 of $1.293 dollars to £1.00).

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).

2019 Q3 interim dividend of 8.03 cents per share (paid on 8 November 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	65.1	65.6		64.5
Mexico	23.5	23.7		21.1
Argentina	4.7	4.7		1.3
Colombia	2.5	2.5		3.2
Chile	1.7	1.7		6.6
Peru	1.3	1.3		3.3
Panama	0.5	0.5		0.0
Net current assets(inc. fixed interest)	0.7	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	24.1	32.6
Materials	14.1	13.2
Energy	13.8	10.4
Consumer Staples	13.2	15.0
Industrials	9.9	6.7
Consumer Discretionary	7.7	5.9
Utilities	5.6	5.6
Real Estate	3.2	1.5
Communication Services	4.6	6.7
Health Care	2.8	1.6
Information Technology	1.0	0.8
	-----	-----
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	9.9	7.9
Itau Unibanco	Brazil	7.1	6.2
Banco Bradesco	Brazil	5.4	6.4
America Movil	Mexico	4.6	4.0
Vale	Brazil	4.5	5.8
Banco do Brasil	Brazil	4.0	1.5
FEMSA	Mexico	3.4	2.8
Walmart de Mexico y Centroamerica	Mexico	3.4	2.3
Rumo Logística Operadora Multimodal	Brazil	3.1	1.0
Grupo Financiero Banorte	Mexico	2.9	2.1

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

For the month of November 2019, the Company’s NAV returned -3.5% with the share price moving -1.9%¹. The Company’s benchmark, the MSCI EM Latin America Index, returned -4.1%¹ on a net basis (all performance figures are in sterling terms with dividends reinvested).

Brazil underperformed in the region as local and regional issues hit the country’s performance; contamination by the recent political protests in Latin America, political noise regarding the former president, Lula da Silva's release from prison and internal conflicts in President Bolsonaro’s party. The BRL (Brazilian Real) was a major drag on the country’s performance during the month with its sharp underperformance leading the Brazilian Central Bank (BCB) to sell USD, curbing the Real’s depreciation, demonstrating that the monetary authority is willing to use its liquid international reserves of US$329 billon to guarantee a bridge of liquidity to the market. Chile was the worst performing market during the month with the CLP (Chilean Peso) weakening 9.1% against the US Dollar over the month. The lingering instability associated with protracted social unrest and portfolio reallocation finally forced the BCCH (Banco Central de Chile) to announce a currency intervention program. Against the backdrop of widespread protests, the government and the opposition reached an agreement on tax reform and budgetary matters as well as on the formal process to pursue constitutional reform. The portfolio’s stock selection in Mexico contributed most to returns, while Brazilian stock selection weighed on relative performance most in November.

Our overweight holding in Ternium, a manufacturer of flat and long steel products in Mexico, was the top contributor on a relative basis as steel stocks globally have rallied on the back of reduced probability of global recession in the next 12 months and steps towards a resolution of a “phase 1” trade deal between US and China helped demand outlook. Overweight positioning in B2W Companhia, an online retail company in Latin America, also benefited performance during the month as the stock rallied following good results. On the other hand, an underweight position in Vale was the biggest detractor over the month on a relative basis as the stock recovered after its recent weakness. An overweight position in Brazilian bank, Itau Unibanco, was also a big detractor during the month as the stock declined on increasing competition.

Over the month we added to our holdings in Vale, Brazilian iron ore producer, as depreciation of Brazilian Real should benefit its export-oriented business, stock valuations are cheap and we see the company turning the corner in terms of Brumahdino dam-related issues. We also added to Fleury, a Brazilian-based medical laboratory services company, as we like dynamics in the Brazilian healthcare sector with unemployment starting to decline and the economy improving, which should help the company to gain new clients. We cut our holdings of Brazilian stock exchange, B3 Brasil Bolsa Balcao, by locking in profits as the stock has been a notable outperformer versus the MSCI Latin America benchmark throughout the year. At current valuations, the stock trades at a notable premium to the Brazilian market and its own historical multiples. We sold holding of Qualicorp, a Brazilian healthcare insurer, as we see limited upside following the stock’s strong performance and hitting our target price. The portfolio ended the month being overweight to Brazil, Mexico and Argentina, while being underweight to Chile, Peru and Colombia. We also maintain an off-benchmark allocation to Panama. At the sector level, we are overweight to energy and industrials. We are underweight to financials and communications services.

Brazil continues to display a constructive environment in congress to advance President Jair Bolsonaro’s ambitious set of fiscal and administrative reforms.  We maintain the view that Brazil is on the path of modest economic recovery backed by structural tailwinds including an uptick in private investment, a significant increase in oil production and increased formal job creation. In Mexico, economic growth has ground to a halt as the private sector has reigned in investment related to President Lopez Obrador’s uncertain policy initiatives. We see equity valuations in Mexico trading at multi-year lows, reflecting lower growth environment, and look towards easing monetary policy, and eventual approval of USMCA (United States–Mexico–Canada Agreement) trade agreement in North America and the launch of a national infrastructure plan as catalysts to improve business sentiment. In Peru, we are underweight as we see negative newsflow on politics following President Vizcarra’s initiatives to dissolve Congress continues to result in further political uncertainty, leading to reduced business confidence. The portfolio has recently reduced its underweight position in Colombia as valuations and economic stability has led to intriguing investment opportunities. Argentina’s presidential transition continues to present uncertainty and we look to take advantage of opportunities arising from volatility and extreme pessimism in the near term. Finally, we remain comfortable with an underweight position in Chile amidst a background of protests related to social inequality and signs of economic growth deceleration in the economy. While the political landscape in Latin America continues to present both opportunities and challenges in equity markets, we are encouraged as the external environment appears to support asset prices due to reduction in trade tensions between the US and China and global coordination to maintain low interest rates, supporting economic expansion.

¹Source: BlackRock, as of 30 November 2019.

20 December 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.