BlackRock Latin American Investment Trust Plc - Portfolio Update

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at 31 July 2017 and unaudited.

Performance at month end with net income reinvested   

	One month %	Three months %	One  year %	Three years %	Five years %	^^Since 31.03.06 %
Sterling:
Net asset value^	7.5	4.6	18.2	11.0	8.9	88.2
Share price	8.9	5.8	20.0	7.2	4.3	75.4
MSCI EM Latin America	6.7	4.5	19.3	12.8	6.4	105.4
US Dollars:
Net asset value^	9.1	6.6	17.3	-13.3	-8.2	43.2
Share price	10.5	7.8	19.1	-16.3	-12.2	33.4
MSCI EM Latin America	8.3	6.5	18.4	-11.9	-10.5	56.1

^cum income
^^Date which BlackRock took over the investment management of the Company.
Sources: BlackRock, Standard & Poor’s Micropal

At month end
Net asset value – capital only:	505.78p
Net asset value – cum income:	511.21p
Share price:	444.00p
Total Assets#:	£211.2m
Discount (share price to cum income NAV):	13.1%
Average discount* over the month – cum income:	14.2%
Net gearing at month end**:	5.9%
Gearing range (as a % of net assets):	0-25%
Net yield##:	2.7%
Ordinary shares in issue***:	39,369,620
Ongoing charges****:	1.2%

#Total assets include current year revenue.
## calculated using total dividends declared in the last 12 months as at the date of this announcement as a percentage of month end share price.
*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.
***Excluding 2,071,662 shares held in treasury.
**** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 31 December 2016.

Geographic Exposure

	% of Total Assets	% of Equity Portfolio *		MSCI EM Latin American Index
Brazil	63.9	63.3		55.2
Mexico	27.8	27.5		28.9
Argentina	3.6	3.6		0.0
Peru	3.2	3.2		2.9
Chile	1.5	1.5		9.5
Panama	0.5	0.5		0.0
Colombia	0.4	0.4		3.5
Net current liabilities (inc. fixed interest)	-0.9	0.0		0.0
	-----	-----		-----
Total	100.0	100.0		100.0
	-----	-----		-----

   

Sector	% of Equity Portfolio *	% of Benchmark
Financials	31.5	29.9
Consumer Staples	20.0	17.0
Materials	14.4	15.3
Energy	9.5	7.7
Consumer Discretionary	8.4	6.3
Industrials	6.2	6.5
Telecommunication Services	5.4	6.6
Real Estate	1.6	1.7
Utilities	1.3	6.3
Information Technology	1.0	1.6
Health Care	0.7	1.1
	-----	-----
Total	100.0	100.0
	-----	-----

*excluding net current liabilities & fixed interest

Ten Largest Equity Investments (in percentage order)

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Itau Unibanco	Brazil	7.3	6.2
Petrobras	Brazil	7.0	4.8
Banco Bradesco	Brazil	6.8	6.2
Vale	Brazil	5.8	5.0
Ambev	Brazil	4.9	4.6
Femsa	Mexico	4.1	3.2
BM&F Bovespa	Brazil	3.5	2.2
America Movil	Mexico	3.5	4.7
Grupo Financiero Banorte	Mexico	3.4	2.7
Groupo Mexico	Mexico	2.8	2.0

Commenting on the markets, Will Landers, representing the Investment Manager noted;

For the month of July 2017, the Company’s NAV rose by 7.5% and the share price rose by 8.9%. The Company’s benchmark, the MSCI EM Latin America Index, rose by 6.7% (all performance figures are in sterling terms with income reinvested and are net of ongoing charges).

Our higher than index weighting and stock selection in Brazil were the top contributors in July, as the Brazilian Real (BRL) gained almost 6% against the US Dollar (USD), while higher commodity prices and the central bank’s willingness to continue cutting rates at an accelerated pace supported the market. Petrobras and Bradespar, a holding company for Vale, were among the month’s top performers as both oil and iron ore made strong gains in July, the latter of which was driven by strong manufacturing and economic data from China. Rail operator, Rumo, was the largest individual contributor in July, gaining on news surrounding positive negotiations towards the extension of their rail concessions, as well the government announcing the public hearing and auction dates for the North-South railway. Lower than index weightings in Colombia and Mexico also benefitted the portfolio, as both markets underperformed the broader region. On the other hand, our off-benchmark allocation to Argentina weighed on performance, with utility Pampa Energia among the largest detractors. Mexican consumer staple, Arca Continental, was July’s worst performing stock, which missed on net income partially due to foreign exchange (FX) charges related to their US acquisition.

During the month broad positioning remained relatively unchanged, though we did shift our Brazilian financials positioning, reducing exposure to Itau and BM&F Bovespa, redeploying those funds to Bradesco on better upside expectations. On the other hand, we sold down our position in Mexican airline, Volaris, as pricing pressure in Mexico City intensifies as the Aeromexico/Delta JV has been seen to be ramping up capacity more than expected. We also took profits in Raia Drogasil after strong performance and participated in the IPO of Brazilian insurance firm, IRB. The Company ended the month with an above index weighting in Brazil and Peru while having a below index weighting in Chile, Colombia, and Mexico. We also maintain an off-benchmark allocation to Argentina. At the sector level, we are overweight energy and select consumer staples, while being underweight utilities and telecom.

As we enter the third quarter, our positioning and outlook remain relatively unchanged.  Concerns regarding another potential overhang in Brazil’s presidency have abated with the recent 263-227 vote in which the lower house rejected the corruption charges brought against President Temer, allowing the administration to pivot back towards their economic agenda.  With increased stability from the political front, the primary drivers for Brazilian equities should remain the same: a) the continued easing cycle by the Central Bank which should help to bring forward the needed economic recovery; and b) progress on the reform agenda, especially pension reform, which should help to bring stability to government accounts in the medium term.  Once the latter passes, we believe this will open the door for the Central Bank to bring the easing cycle further forward, and potentially bring rates lower than market expectations.  Meanwhile, despite a more conciliatory tone from the US government on the trade front, we maintain our cautious view on Mexican growth, and therefore our underweight (despite a PRI (Institutional Revolutionary Party) win in the gubernatorial election (Mexico’s national governor elections) in the state of Mexico in early June, results were not conclusive as to the likelihood of a MORENA (National Regeneration Movement) victory in next year’s presidential elections). We continue to hold a below index weighting in Chile due to rich valuations and lack of free-float liquidity, and despite slower than expected progress on the infrastructure front.  We continue to favour Peru among its Andean neighbours. Argentina remains another top region for the strategy as fundamentals persist, with the recent correction providing a positive entry point for longer-term investments.

16 August 2017

ENDS

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