BlackRock Latin American Investment Trust plc

11/17/2020 | Press release | Distributed by Public on 11/17/2020 11:37

BlackRock Latin American Investment Trust Plc - Portfolio Update

The information contained in this release was correct as at 31 October 2020. Information on the Company's up to date net asset values can be found on the London Stock Exchange Website at


All information is at 31 October 2020 and unaudited.

Performance at month end with net income reinvested

Net asset value^ -2.2 -11.1 -34.2 -28.5 20.5
Share price -0.6 -5.9 -30.0 -25.3 25.3
MSCI EM Latin America
(Net Return)^^
-1.1 -10.7 -33.1 -27.8 23.2
US Dollars:
Net asset value^ -2.2 -12.5 -34.3 -30.4 0.8
Share price -0.6 -7.3 -30.0 -27.3 4.8
MSCI EM Latin America
(Net Return)^^
-1.1 -12.0 -33.1 -29.7 3.2

^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. Historically the benchmark data for the Company has always been stated on a Gross basis. However, as disclosed in the Company's Interim Report for the six months ended 30 June 2018, it is the Board's intention to monitor the Company's performance with reference to the NR version of the benchmark. For transparency both sets of benchmark data have been provided.

Sources: BlackRock, Standard & Poor's Micropal

At month end

Net asset value - capital only: 322.75p
Net asset value - including income: 326.17p
Share price: 302.50p
Total assets#: £145.7m
Discount (share price to cum income NAV): 7.3%
Average discount* over the month - cum income: 9.9%
Net gearing at month end**: 14.2%
Gearing range (as a % of net assets): 0-25%
Net yield##: 6.3%
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 6.3% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 24.76 centsper share) and using a share price of 391.13 US cents per share (equivalent to the sterling price of 302.50 penceper share translated in to US cents at the rate prevailing at 31 October 2020of $1.293 dollarsto £1.00).

2019 Q4 Final dividend of 9.15 centsper share (paid on 06 February 2020).

2020 Q1 interim dividend of 4.59 centsper share (paid on 20 May 2020). 2020 Q2 interim dividend of 5.57 centsper share (paid on 11 August 2020).

2020 Q3 interim dividend of 5.45 centsper share (pay date 09 November 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 62.7 62.5 62.5
Mexico 26.8 26.7 23.3
Chile 8.5 8.4 7.0
Argentina 2.4 2.4 1.7
Peru 0.0 0.0 3.2
Colombia 0.0 0.0 2.3
Net current liabilities (inc. fixed interest) -0.4 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 13.8% of the Company's net asset value.

Sector % of Equity Portfolio* % of Benchmark*
Materials 25.2 19.3
Financials 24.3 25.2
Consumer Discretionary 15.9 7.4
Industrials 8.0 7.4
Energy 6.4 8.2
Consumer Staples 5.0 15.1
Communication Services 4.6 6.7
Real Estate 3.7 0.8
Health Care 3.3 2.2
Utilities 2.2 6.1
Information Technology 1.4 1.6
----- -----
Total 100.0 100.0
===== =====

*excluding net current assets & fixed interest

Company Country
of Risk
% of
Equity Portfolio
% of
Banco Bradesco - ADR Brazil 7.1 4.3
Vale - ADS Brazil 6.8 8.5
Petrobras - ADR Brazil 6.4 6.1
B3 Brazil 4.9 4.0
America Movil - ADR Mexico 4.6 4.5
Grupo Financiero Banorte Mexico 4.2 2.5
Walmart de Mexico y Centroamerica Mexico 4.0 2.8
Grupo Mexico Mexico 3.8 1.9
Cemex Mexico 3.4 1.4
Quimica Y Minera - ADR Chile 3.4 0.0

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

For the month of October 2020, the Company's NAV returned -2.2%1 with the share price moving -0.6%1. The Company's benchmark, the MSCI EM Latin America Index, returned -1.1%1 on a net basis (all performance figures are in sterling terms with dividends reinvested).

The Latin American region posted a negative performance over the month. All Latin American countries, except Mexico, posted a weak performance with Braziland Colombialeading the declines.

Stock selection in Mexicocontributed most to relative performance over the period, while stock selection in Brazildetracted most to relative returns over the period. The Company's holding in Grupo Financiero Banorte, a Mexican banking and financial services company, contributed the most to performance as the company announced strong 3Q results (beating net income consensus expectations). A position in Sociedad Quimica y Minera de Chile, a large lithium producer based in Chile, also benefitted the portfolio as the stock rose on the back of demand picking up and on the expectation of rising lithium prices. On the other hand, an off-benchmark holding of Afya, a leading medical education group in Brazil, was the top detractor on a relative basis as the stock declined amidst some risk off taking by the market ahead of the US election. An overweight position in Vasta Platform, an education company in Brazil, also weighed on returns due to delay in intake process overall due to Covid-19.

Over the month, we added to the Brazilian electronics and appliance retailer, Via Varejo Digital, as a strong real estate market and low interest rates should benefit appliance and furniture sales going forward. We initiated a position in the Brazilian pulp and paper company, Suzano, based on expectations of higher pulp prices in 2021 and the attractive ESG profile of the company. We reduced exposure to the Brazilian meat processing company, JBS, given poor ESG ratings and a team view that the business had reached peak margins. We sold the portfolio's holding of Brazilian electric services company, Energisa, to reduce exposure to interest rate sensitive bond proxies. The portfolio ended the month being overweight to Brazil, Mexico, Chileand Argentina, while being underweight in exposure to Peruand Colombia. At the sector level, we are overweight to the consumer discretionary and materials sectors and underweight in consumer staples and utilities sectors.

We are optimistic on returns for Latin American equities going forward given the prospect for low global interest rates to persist over the medium term, economic recovery in 2021 and anticipation of a weaker US dollar environment favoring Latam currencies. In Brazil, the portfolio is tilted towards the re-opening trade as we believe high mobility stocks have a greater opportunity to outperform their low mobility peers and are aided by a material and persistent valuation gap for these stocks that has accumulated since the peak of the domestic lockdown in mid-May. Meanwhile, in the US, the demand recovery and healthy housing market should favor Mexicogiven supply chain linkages and trade flows between the countries. Politics and vaccine hopes are catalysing a reflation trade. This is in line with a temporary period in which inflation, thanks to commodities, rises in a repeat of the exit from the GFC. Higher raw material prices would also provide a tailwind for Latin Americagiven the high level of commodity exports across major economies in the region. Focusing on Brazil, more cyclical and credit-dependent sectors appear to be recovering faster. This sectoral dynamic suggests that the Brazil Central Bank's liquidation and risk reduction measures have-thus far -not only prevented an explosion in defaults but have also allowed banks to cushion the negative impacts of the crisis, with credit playing an important anti-cyclical roll. In the long run, to consolidate this recovery, we believe that stringent fiscal discipline is needed to limit the fiscal legacy of emergency measures. Additional data points that confirm recovery is underway include 3Q company operational earnings which broadly beat expectations. General trends across sectors show that the top line continued to recover, at least sequentially. Efficiencies increased across many companies, with costs cutting and expense reduction initiatives benefitting margins, which in general terms led to the aforementioned earnings exceeding quarterly estimates. We even saw some companies lowering leverage, going ahead with buybacks or increasing capex plans which points to resumption of business confidence and strength of balance sheets.

1Source: BlackRock, as of 31 October 2020.

17 November 2020


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