Portfolio Update

The information contained in this release was correct as at 31 October 2021.  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 October 2021 and unaudited.
 

Performance at month end with net income reinvested
 

	One month %	Three months %	One  year %	Three years %	Five years %
Sterling:
Net asset value^	-8.7	-15.1	13.0	-21.9	-18.0
Share price	-5.3	-13.1	12.9	-12.7	-9.9
MSCI EM Latin America (Net Return)^^	-6.9	-13.2	15.0	-18.1	-15.9
US Dollars:
Net asset value^	-7.2	-16.3	19.8	-16.2	-7.9
Share price	-3.8	-14.3	19.7	-6.3	1.2
MSCI EM Latin America (Net Return)^^	-5.3	-14.4	21.9	-12.2	-5.6

^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:	348.86p
Net asset value - including income:	350.52p
Share price:	323.00p
Total assets#:	£157.0m
Discount (share price to cum income NAV):	7.9%
Average discount* over the month – cum income:	11.9%
Net gearing at month end**:	14.8%
Gearing range (as a % of net assets):	0-25%
Net yield##:	6.5%
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 6.5% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 28.80 cents per share) and using a share price of 442.77 US cents per share (equivalent to the sterling price of 323.00 pence per share translated in to US cents at the rate prevailing at 31 October 2021 of $1.3708 dollars to £1.00).

2020 Q4 Final dividend of 7.45 cents per share (paid on 08 February 2021).
2021 Q1 interim dividend of 6.97 cents per share (paid on 10 May 2021).
2021 Q2 interim dividend of 7.82 cents per share (paid on 6 August 2021).
2021 Q3 interim dividend of 6.56 cents per share (payable on 8 November 2021).

*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 2020.

Geographic Exposure	% of Total Assets	% of Equity Portfolio *	MSCI EM Latin America Index
Brazil	57.0	56.7	58.2
Mexico	27.4	27.3	27.9
Chile	8.0	7.9	5.8
Peru	3.7	3.7	2.9
Argentina	2.8	2.8	2.6
Panama	1.7	1.6	0.0
Colombia	0.0	0.0	2.6
Net current Liabilites (inc. fixed interest)	-0.6	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 14.1% of the Company’s net asset value.

Sector	% of Equity Portfolio*	% of Benchmark*
Financials	26.4	22.8
Materials	17.9	21.6
Consumer Staples	13.6	16.7
Communication Services	7.7	8.0
Energy	7.2	10.0
Industrials	7.1	6.3
Health Care	6.0	2.7
Consumer Discretionary	5.9	4.1
Information Technology	3.5	2.9
Real Estate	3.3	0.7
Utilities	1.4	4.2
	-----	-----
Total	100.0	100.0
	=====	=====

*excluding net current liabilities & fixed interest

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Petrobrás – ADR:	Brazil
Equity		4.5	3.4
Preference Shares		2.7	4.3
Vale – ADS	Brazil	6.8	9.3
Banco Bradesco – ADR	Brazil	5.4	4.0
América Movil – ADR	Mexico	5.0	5.7
B3	Brazil	4.8	2.4
Grupo Financiero Banorte	Mexico	4.3	3.1
Walmart de México y Centroamérica	Mexico	4.2	3.4
Credicorp	Peru	3.7	1.6
Cemex – ADR	Mexico	3.4	1.8
BB Seguridade Participaçes	Brazil	3.3	0.5

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

For the month of October 2021, the Company’s NAV returned -8.7% with the share price moving -5.3%. The Company’s benchmark, the MSCI EM Latin America Index, returned -6.9% on a net basis (all performance figures are in sterling terms with dividends reinvested).

Latin American (LatAm) equities posted a negative performance over the month with Brazil and Chile leading the decline.

Allocation in Peru contributed the most to relative performance over the period while security selection in Brazil detracted most from relative returns. An overweight exposure to  the Peruvian financial company, Credicorp, was the top contributor as the stock continued to perform well following a period of volatility in the first half of 2021 surrounding the Peruvian presidential elections. We viewed the stock as oversold given the uncertain election outcomes at the time and took the opportunity to build up a position in the stock earlier this year at attractive valuations. An overweight holding in BB Seguridade, a Brazilian insurance company, also benefitted the fund as the company is forecasting higher investment income linked to a  rapid rise in Brazilian interest rates. The claims ratio for the insurance company should also improve going forward following elevated losses stemming from the pandemic.  On the other hand, an overweight position in Sendas Distribuidora, a Brazilian food distributor, detracted most from relative performance following the announcement of an acquisition of 88 stores that will be incorporated into Sendas’ footprint. The purchase was unexpected and the valuation of the assets being acquired is under scrutiny by investors, leading to near-term share price weakness. We continue to like Sendas Distribuidora based on the company’s leading market share  in the cash & carry retail format which we believe will benefit  as rising  inflation in Brazil impacts consumer purchasing  power and lower cost distributors are more in demand. An off-benchmark holding of SmartFit, a Brazilian gym chain, also weighed on relative returns despite the business seeing recovery ahead of initial expectations. We attribute the weakness to rising interest rates in Brazil, which can have a detrimental impact on companies with smaller market capitalizations.  

Over the month we added to Rede D’Or, a Brazilian healthcare company: earnings momentum remains strong as the company accelerates its leadership position in a market with attractive long term growth opportunities.  We initiated a position in XP Inc, a Brazilian investment management company, as we continue to see the company taking market share from incumbent banks. The company has an attractive mix of profitable businesses with good growth prospects. We reduced exposure to the Mexican mining company, Grupo Mexico, as we believe the copper price is vulnerable to a slowdown in China’s construction sector and its wider economy. We sold a holding in the Brazilian real estate company, Cyrela, as the rising interest rate environment remains a headwind for the rate-sensitive homebuilding sector. The portfolio ended the period being overweight to Brazil and Chile, whilst being underweight to Colombia and Argentina. At the sector level, we are overweight financials and health care, and underweight utilities and energy.

It has been a tough period for Latin America, with many countries hit hard by the COVID-19 crisis. However, we believe there are arguments to be made for better times ahead for the region as the world rebuilds after the pandemic and Latin America is potentially well-placed to benefit from  a wider recovery in the global economy. As the world rebuilds, the Latin American region will have some important tailwinds. Perhaps the most significant of these will be higher commodity prices as vast stimulus initiatives in the US and the economic recovery across the world  push up demand for commodities after a period of tight supply. Global governments have ambitious, commodity-heavy infrastructure plans, particularly for green energy development. Latin America is also one of the most abundant regions in the world for lithium, iron ore and copper with some of the longest-life (and comparatively low cost) reserves in Brazil, Chile, and Peru. Despite this positive external backdrop, there are also broader risk factors that could weigh on regional economic growth. Across Latin America, a growing middle class is seeing domestic consumption pressured by rising inflation and increasing domestic interest rates. Latin American economies were boosted throughout the pandemic for the most part by expansionary monetary and fiscal policies. This has led to a rapid near-term rebound in demand given the reopening of economies at a time where rising energy costs, low inventories and supply chain issues have led to inflation exceeding expectations across the region. Central banks have reacted aggressively by hiking domestic interest rates to dampen rising inflation. The impact of rising domestic rates will weigh on growth prospects at the margin but could be offset by continued loose fiscal policy. Over the next 12 months we will see presidential elections in Chile, Colombia and Brazil and one of the biggest debates is in respect of the amount of government spending required to continue to support development. The outcome of these debates will have a profound impact on growth going forward.  Against this challenging backdrop, we see Latin American equities as already pricing in many risk factors, with a number of stocks and country indices already trading at discounted valuations in both absolute and relative terms.

¹Source: BlackRock, as of 31 October 2021.

23 November 2021

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.