Portfolio Update

The information contained in this release was correct as at 31 May 2024.  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 May 2024 and unaudited.
 

Performance at month end with net income reinvested
 

	One month %	Three months %	One year %	Three years %	Five years %
Sterling:
Net asset value^	-4.4	-7.4	3.1	18.4	3.7
Share price	-3.2	-5.4	5.1	19.2	8.3
MSCI EM Latin America (Net Return)^^	-4.7	-6.2	9.6	25.6	12.7
US Dollars:
Net asset value^	-2.8	-6.8	5.8	6.3	4.9
Share price	-1.5	-4.8	7.9	7.1	9.4
MSCI EM Latin America (Net Return)^^	-3.1	-5.6	12.6	12.5	13.8

^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:	419.48p
Net asset value - including income:	422.39p
Share price:	368.00p
Total assets#:	£137.2m
Discount (share price to cum income NAV):	12.9%
Average discount* over the month – cum income:	13.4%
Net Gearing at month end**:	11.0%
Gearing range (as a % of net assets):	0-25%
Net yield##:	6.4%
Ordinary shares in issue(excluding 2,181,662 shares held in treasury):	29,448,641
Ongoing charges***:	1.13%

#Total assets include current year revenue.

##The yield of 6.4% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 30.00 cents per share) and using a share price of 468.54 US cents per share (equivalent to the sterling price of 368.00 pence per share translated in to US cents at the rate prevailing at 31 May 2024 of $1.273 dollars to £1.00).

2023 Q2 Interim dividend of 7.54 cents per share (Paid on 11 August 2023)

2023 Q3 Interim dividend of 7.02 cents per share (Paid on 09 November 2023)

2023 Q4 Interim dividend of 8.05 cents per share (Paid on 09 February 2024)

2024 Q1 Interim dividend of 7.39 cents per share (Paid on 13 May 2024)

*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.

*** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for the year ended 31 December 2023.

Geographic Exposure	% of Total Assets	% of Equity Portfolio *	MSCI EM Latin America Index
Brazil	58.2	57.8	57.4
Mexico	30.8	30.6	30.9
Chile	4.0	4.0	6.0
Colombia	2.6	2.6	1.4
Multi-Country	1.9	1.8	0.0
Argentina	1.8	1.8	0.0
Panama	1.4	1.4	0.0
Peru	0.0	0.0	4.3
Net current Liabilities (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 10.3% of the Company’s net asset value.

Sector	% of Equity Portfolio*	% of Benchmark*
Financials	24.7	25.6
Consumer Staples	18.1	15.9
Industrials	14.1	10.5
Materials	13.9	18.6
Consumer Discretionary	10.4	1.8
Energy	10.0	13.6
Health Care	4.1	1.5
Real Estate	2.7	1.2
Information Technology	1.8	0.6
Communication Services	0.2	4.2
Utilites	0.0	6.5
	-----	-----
Total	100.0	100.0
	=====	=====

*excluding net current assets & fixed interest

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Petrobrás:	Brazil
Equity		2.0
Equity ADR		5.6	4.9
Preference Shares ADR		2.4	6.0
Vale – ADS	Brazil	7.5	7.0
Walmart de México y Centroamérica	Mexico	5.8	3.3
Grupo Financiero Banorte	Mexico	5.8	4.2
Banco Bradesco:	Brazil
Equity ADR		3.9	0.6
Preference Shares		1.7	2.2
Grupo Aeroportuario del Pacifico – ADS	Mexico	4.5	1.2
B3	Brazil	4.4	2.0
AmBev:
Equity	Brazil	0.7
Equity ADR	Brazil	2.6	1.8
MAG Silver Corp	Mexico	3.1	0.0
Itaú Unibanco – ADR	Brazil	3.1	4.9

Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;

The Company’s NAV fell -4.4% in May, outperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -4.7% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.¹

Emerging Markets posted flattish returns (+0.6%) in May, significantly underperforming Developed Markets (+4.5%). Latin America (-3.1%) lagged all other regions on the Federal Reserve (the Fed)  re-pricing overhang. Brazil was down -5.0% as the country grappled with concerns around severe floods affecting both inflation and fiscal stability. Mexico declined -2.5% amid pre-election nervousness although the Mexican Peso remained stable. On the other hand, Argentina, Colombia and Peru all posted positive returns. Rate cuts in the latter two countries were particularly well received.

At the portfolio level, our exposure to precious metals stocks in Mexico and Ecuador continue to be the key positive contributors to performance. On the other hand, having no exposure to Peru hurt performance over the month. So did our stock picking in Chile. 

From a security lens, Mexican silver miner, Mag Silver, was the largest contributor, for the third month in a row. The stock was supported by an increase in silver prices, as the commodity continues to rally despite a more hawkish Federal Reserve. An underweight position to Brazilian oil and gas company, Petrobras, also helped performance as the stock declined following news of the dismissal of the company's CEO. An overweight position in Mexican airport operator, Grupo Aeroportuario del Pacífico (GAPB), was another contributor, for the second month in a row after delivering decent traffic numbers. Our overweight position in Brazilian integrated healthcare operator, Hapvida, also contributed positively to performance. The stock rallied ahead of their Q1 earnings call which confirmed robust earnings growth driven by new customer additions and favourable industry trends.

On the flipside, IRB, the Brazilian reinsurance company was the biggest detractor for performance in May, reversing gains seen in April. An overweight position in Brazilian Retailer, Lojas Renner, was another detractor during the month as their latest earnings report surprised to the downside. The company has struggled to stay competitive against cheap foreign imports while sticky rate policy continues to be a broader burden to Brazil's equity markets. Brazilian bank, Bradesco, also impacted performance over the month on the back of a deteriorating net interest income outlook.

We made few changes to the portfolio in May. We exited Chilean pulp and paper company, Empresas CMPC, on the back of relative performance. Pulp prices went up on supply disruptions and we believe the overall market should become more oversupplied going forward. We added to our holding in Mexican bank, Banorte, on the back of weakness going into the Mexican elections. We also initiated a position in Mexican highway operator, Pinfra. This is a well-run, conservative business that trades on low multiples.

Brazil is the largest portfolio overweight as of May end. Mexico is our second largest overweight. On the other hand, we remain underweight in Peru due to its political and economic uncertainty. The second largest portfolio underweight is Chile.

Outlook

We remain optimistic about the outlook for Latin America. Central banks have been proactive in increasing interest rates to help control inflation, which has fallen significantly across the region. As such we have started to see central banks beginning to lower interest rates, which should support both economic activity and asset prices. In addition, the whole region is benefitting from being relatively isolated from global geopolitical conflicts. We believe that this will lead to both an increase in foreign direct investment and an increase in allocation from investors across the region.  

Brazil is the showcase of this thesis - with the central bank cutting the policy rate considerably. We anticipate further reductions, particularly if the Federal Reserve ceases its own rate hikes. The government’s fiscal framework being more orthodox than market expectations has helped to reduce uncertainty regarding the fiscal outlook and was key for confidence. We expect further upside to the equity market in the next 12-18 months as local capital starts flowing into the market.  

We remain positive on the outlook for the Mexican economy as it is a key beneficiary of the friend-shoring of global supply chains. Mexico remains defensive as both fiscal and the current accounts are in order. The outcome of the presidential elections in early June has created a lot of volatility for Mexican financial assets, with the peso depreciating significantly. Investors are concerned that the landslide win of president-elect Sheinbaum and the Morena party will result in reduced checks and balances for the government and potentially detrimental judicial reforms. We have visited Mexico in the week after the election to meet with investors, business owners and political advisors. Our conclusion from that trip is that we believe the government will remain relatively pragmatic and fiscally prudent, as it has been during AMLO’s term. We have therefore used the market correction to add to certain positions.

In light of this, we have been taking advantage of the recent weakness to add to the country, as we believe the market reaction to the election outcome is unwarranted.

We continue to closely monitor the political and economic situation in Argentina, after libertarian Javier Milei unexpectedly won the presidential elections in November. Milei is facing a very difficult situation, with inflation around 290% year-on-year, FX reserves depleted and multiple economic imbalances. To further gauge sentiment on the ground, we travelled to the country in January. The trip further instilled our cautious view on the economic outlook for the country, and we see no fundamental reasons as to why we would want to buy this market now.

We acknowledge the strengths of the data in the United States, but we believe that, ultimately, the domestic economic outlook in the Latin American countries will be the key driver of local interest rates. We therefore maintain conviction in the funds positioning in rate-sensitive domestic stocks. In addition, our view of a softer US labor market and further disinflation seems to be playing out, as evidenced by the recent rise in jobless claims and the relatively benign May inflation data. As a result, the pressure from higher rates in the US is easing.

1Source: BlackRock, as of 31 May 2024.

21 June 2024

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.

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