Portfolio Update

The information contained in this release was correct as at 29 February 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 29 February 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^	-9.5	-5.2	-7.6	3.7	28.7
Share price	-15.6	-6.6	-5.1	7.2	32.3
MSCI EM Latin America (Net Return)^^	-9.2	-7.3	-8.2	-1.5	26.1
US Dollars:
Net asset value^	-12.3	-6.4	-11.2	6.4	6.4
Share price	-18.2	-7.8	-8.8	9.9	9.3
MSCI EM Latin America (Net Return)^^	-12.1	-8.4	-11.9	1.1	4.2

^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:	468.46p
Net asset value – cum income:	469.83p
Share price:	412.00p
Total Assets#:	£192.5m
Discount (share price to cum income NAV):	12.3%
Average discount* over the month – cum income:	10.2%
Net cash at month end**:	4.1%
Gearing range (as a % of net assets):	0-25%
Net yield##:	6.6%
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 6.6% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 34.89 cents per share) and using a share price of 526.25 US cents per share (equivalent to the sterling price of 412.00 pence per share translated in to US cents at the rate prevailing at 29 February 2020 of $1.2773 dollars to £1.00).

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).

2019 Q4 Final dividend of 9.15 cents per share (paid on 6 February 2020).

*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	63.4	63.6		64.1
Mexico	27.3	27.4		21.9
Colombia	4.2	4.2		3.3
Argentina	3.8	3.8		1.5
Chile	1.0	1.0		6.2
Peru				3.0
Net current assets (inc. fixed interest)	0.3	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 4.4% of the Company’s net asset value.

Sector	% of Equity Portfolio *	% of Benchmark
Financials	29.1	31.4
Consumer Staples	14.6	14.8
Energy	11.9	10.2
Materials	11.6	12.5
Consumer Discretionary	8.8	6.3
Industrials	8.3	7.0
Communication Services	5.4	7.1
Utilities	3.7	6.0
Real Estate	3.6	1.6
Health Care	1.9	2.1
Information Technology	1.1	1.0
	-----	-----
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	8.4	7.8
Banco Bradesco	Brazil	8.3	5.9
Itau Unibanco	Brazil	6.9	5.8
America Movil	Mexico	5.4	4.5
Banco do Brasil	Brazil	4.2	1.5
Walmart de Mexico y Centroamerica	Mexico	3.9	2.5
Vale	Brazil	3.5	5.3
FEMSA	Mexico	3.5	2.6
Grupo Financiero Banorte	Mexico	3.3	2.4
Cemex SAB	Mexico	2.6	0.8

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

For the month of February 2020, the Company’s NAV returned -9.5%1 with the share price moving -15.6%¹. The Company’s benchmark, the MSCI EM Latin America Index, returned -9.2%¹ on a net basis (all performance figures are in sterling terms with dividends reinvested).

The last week of the month saw an especially sharp sell-off globally driven by new cases of coronavirus accelerating outside of China and rising fears of a global recession. Weaker commodity prices led Latin America markets lower, further putting pressures on local currencies. All countries in Latin America ended the month in a negative territory. The Company’s stock selection in Mexico was the largest contributor to relative returns during the month, while stock selection in Argentina detracted the most from relative performance in February.

Not holding IRB Brazil, a reinsurance company, was the top contributor on a relative basis, as the stock declined following company’s chairman resignation and market discussions regarding the company's accounting practices. An overweight position in Banco Bradesco contributed on a relative basis as the stock was resilient versus the rest of the market in Brazil. On the other hand, our off benchmark holding in Brazilian GOL Airlines was the biggest detractor over the month on a relative basis as the travel stocks declined given new cases of coronavirus accelerating outside of China and rising fears of a global recession. Not holding WEG, a Brazilian company operating worldwide in the electric engineering, power and automation technology fields, also weighed on returns as the tech stock was fairly resilient versus the rest of the market. 

Over the month we added to Banco Bradesco as we believe the headwind on the bank could move away from NIM (Net Interest Margin) pressure due to interest rate cuts, and the market could focus more on acceleration of loan growth as economy improves. We initiated a position in Orbia, a Mexican building and infrastructure company, as we expect the stock to rise from a potential divestment of Vinyl and the management’s focus on expansion to new geographies and specialty products/services. We cut our holding of Arco Platform, an educational software company in Brazil, by locking in profits after the stock’s strong performance. We sold our holding of Southern Copper, a mining company in Peru, by taking in profits after strong relative outperformance

At the end of February and the first weeks of March, global equity markets sold-off aggressively on the back of further nervousness on global economy fears, given the rising COVID-19 concerns and a significant drop in oil prices. Metal commodities have been hit hard, which we believe means the market is already pricing significantly lower global growth over the next quarters. Our base case is that COVID-19 will be under control within the next few months and that China will then launch significant stimulus to reverse the negative impact on the economy. During times of elevated volatility and market stress, we find it important to focus on the long-term investment horizon, adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves. Our constructive long-term thesis for Brazilian equities remains and is based on three pillars: i) a gradual local economic recovery; ii) low interest rates; and iii) structural reforms. On the economic recovery, our expectations have been readjusted downwards amid signs of cooling economic activity in the first quarter of 2020 and the global economic slowdown. Low interest rates could be a silver lining, as the Central Bank has signalled that it may take steps to mitigate the effects of the coronavirus epidemic on the domestic economy. On the structural reforms, we look for progress in administrative and tax reforms, yet growing tensions between the executive and legislative branches have raised concerns about the likelihood of a positive short-term outcome. However, if the reform agenda gets back onto centre stage, Brazil could outperform its emerging market peers. We expect the Colombian index performance to continue fluctuating in tandem with oil prices over the medium term. However, compared with the oil shock in the second half of 2014, Colombian stocks have been trading at lower valuations before the correction started (14x trailing P/E (price to earnings ratio) versus 17x by mid-2014) which, in our view, may mitigate the downside from current levels. At the same time, Colombian companies are entering this period with increased debt levels (2.5x net debt / trailing EBITDA (earnings before interest, tax, depreciation and amortization) versus 2.0x by mid-2014), which may prove problematic if a downturn scenario materializes. From a top-down standpoint, the Colombian government is less dependent on oil, but has limited room to manoeuvre. Oil represents ~8.5% of Colombian government revenue (1.4% of GDP (Gross Domestic Product) in 2019), down from almost 20% in 2013. This transition has come at the cost of increased debt levels (51.6% debt/GDP in 2019 versus 37.1% in 2013), which in our view limits the government’s ability to implement countercyclical policies if the oil shock persists. In Mexico, falling oil prices have tightened the government’s  fiscal rope even further, making it hard for it not to contemplate a higher deficit in 2020. Pemex losses could be offset with government savings, but given the expected weakness in the economy, it’s increasingly likely the government will have to increase the deficit through spending. The government has said it will revisit fiscal policy in April, to decide whether or not to cut fiscal spending. Despite the impact from lower oil prices on the economy, we believe Mexico could be viewed as a defensive market in the current environment, given that the companies listed in Mexico have a low level of financial leverage and the market was already trading at relatively inexpensive valuations heading in to the current volatility, which can limit the downside as external conditions remain challenging.

¹Source: BlackRock, as of 29 February 2020.

27 March 2020

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.