BlackRock Latin American Investment Trust plc

08/16/2019 | Press release | Distributed by Public on 08/16/2019 08:50

BlackRock Latin American Investment Trust Plc - Portfolio Update

All information is at 31 July 2019 and unaudited.

Performance at month end with net income reinvested

Net asset value^ 2.7 12.5 19.6 45.8 36.9
Share price 4.9 13.2 26.5 58.6 41.6
MSCI EM Latin America
(Net Return)^^
4.1 10.9 16.3 39.9 31.6
US Dollars:
Net asset value^ -1.3 5.6 11.6 34.2 -0.8
Share price 0.9 6.3 18.0 46.0 2.6
MSCI EM Latin America
(Net Return)^^
0.1 4.1 8.6 29.1 -4.6

^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: 582.36p
Net asset value - cum income: 583.31p
Share price: 536.00p
Total Assets#: £254.3m
Discount (share price to cum income NAV): 8.1%
Average discount* over the month - cum income: 10.2%
Net gearing at month end**: 11.1%
Gearing range (as a % of net assets): 0-25%
Net yield##: 5.1%
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 5.1% 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 centsper share) and using a share price of 656.30 US cents per share (equivalent to the sterling price of 536.00 penceper share translated in to US cents at the rate prevailing at 31 July 2019of $1.2244 dollarsto £1.00).

2018 Q3 interim dividend of 7.85 centsper share (paid on 9 November 2018)
2018 Q4 interim dividend of 8.13 centsper share (paid on 8 February 2019)
2019 Q1 interim dividend of 8.56 centsper share (paid on 17 May 2019).
2019 Q2 interim dividend of 9.15 centsper share (declared on 1 July 2019and payable 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 *
America Index
Brazil 65.0 65.1 63.9
Mexico 20.8 20.8 19.6
Argentina 7.9 7.9 2.8
Chile 2.9 2.9 7.3
Colombia 2.1 2.1 3.3
Panama 1.2 1.2 0.0
Peru 0.0 0.0 3.1
Net current assets
(inc. fixed interest)
0.1 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 11.1% of the Company's net asset value.

Sector % of Equity Portfolio * % of Benchmark
Financials 29.5 34.0
Consumer Staples 14.8 15.6
Energy 14.2 10.2
Materials 12.3 13.2
Industrials 9.2 6.3
Utilities 6.5 5.9
Communication Services 5.0 6.1
Real Estate 4.0 1.4
Consumer Discretionary 3.2 5.5
Information Technology 1.3 0.9
Health Care 0.0 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
Petrobras Brazil 9.9 7.6
Itau Unibanco Brazil 8.4 6.5
Banco Bradesco Brazil 5.6 6.9
AmBev Brazil 4.6 3.7
Banco do Brasil Brazil 4.2 1.6
B3 Brazil 3.8 3.4
Femsa Mexico 3.5 2.6
Grupo Financiero Banorte Mexico 3.4 1.9
Banco Macro Argentina 3.0 0.5
Rumo Logística Operadora Multimodal Brazil 2.9 0.9

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

For the month of July 2019, the Company's NAV returned +2.7%1 with the share price moving +4.9%1. The Company's benchmark, the MSCI EM Latin America Index (net basis), gained +4.1%1 (all performance figures are in sterling terms with dividends reinvested).

Brazilwas the best market performer in July driven by the approval of the much-awaited pension reform through the Lower House. Mexicowas weak as investor confidence was spooked by the unexpected resignation of Carlos Urzúa as the Finance Minister. Chile, Colombiaand Peruwere also weak.

At the country level, allocation to Chileand Mexicobenefitted the portfolio, while stock selection in Braziland Mexicoselection detracted from relative returns during the month. At the stock level, an overweight position to Mexican building material company, Cemex, was the main detractor on active returns. An overweight position in Mexican bank, Banorte, also negatively contributed to active returns during the month as the shares were hit despite the company reporting in-line with expectations and the full year net income guidance being revised up slightly. Brazilian home builders, Cyrela Brazil Realty, continued to be a strong performer on the back of operational momentum and lending support for home buyers. Off benchmark holding in Brazilian airline company, Azul, helped relative performance as the stock rose following regulator's release of new slot distribution rules for Congonhas airport in Sao Paulo, where Azul could reach a significant market share increase.

Aggregate positioning was relatively unchanged, with Brazilstill being the portfolio's largest overweight. We have been rotating exposure within Brazilby adding to our position in Petrobras, given insufficiently low appreciated reserves in pre-salt oil, lower CAPEX spending, expectations of increased free cash flow and improving management quality leading to better capital allocation decisions. We also added to a Brazilian brewing company, AmBev, as the company's innovation and digitalisation process makes greater use of data to develop products, analysis of market trends and use of social media as low-cost advertising could allow it to enter new markets. On the other side, we cut positions in Vale and Itau Unibanco to take profits. Furthermore, we feel there is some downside risk to Itau Unibanco earnings in the short term and structural pressure on margins and fee generation in the long term, given competition from digital players. The Company ended the month being overweight in Brazil, Mexicoand Argentina, while being underweight in Chile, Peru, and Colombia. At the sector level, we are overweight in Energy and Industrials, while being underweight in Financials and Healthcare.

Brazilremains 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 political newsflow as President Vizcarra's approval rates continue to deteriorate. We remain underweight to Colombiaas we see the latest relaxation of the fiscal rule casting a shadow on the country's commitment to fiscal stability. We have recently begun reducing our underweight position in Chilean equities due to increasingly attractive valuations. Finally, the investment team was on the ground in Argentinain July. Our view has been that the elections in October would be a crucial test for the country and we had been cautiously optimistic about President Macri's chances of a second term. Our view had been predicated on evidence that Macri had been making up ground in the polls versus the opposition, currency looked to have stabilized and inflation was starting to track downwards, and economic activity, while still mixed, appeared closer to bottoming. While we had trimmed some of our positions on the back of market strength in May and June, we went into the primaries running a long position and were wrong footed by the results. Post month end, Macri surprisingly performed very poorly in primary elections and the market fell substantially. We believe a continuation under Macri would have been positive for the market as the country continued to move along the path of economic normalization and a lot of the pain from the adjustment had already been taken. If Macri loses in October then in our view the chance of a sovereign default is high, resulting in considerable downward pressure on asset prices.

1Source: BlackRock as of 31 July 2019.

16 August 2019


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