BlackRock Latin American Investment Trust Plc - Portfolio Update

The information contained in this release was correct as at 28 February 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 28 February 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^	-4.1	-1.8	-14.2	-21.9	42.3
Share price	-5.0	-1.7	-9.8	-14.2	54.7
MSCI EM Latin America (Net Return)^^	-4.7	-3.3	-14.1	-22.6	39.8
US Dollars:
Net asset value^	-2.4	2.9	-6.1	-20.8	42.6
Share price	-3.3	2.9	-1.3	-13.0	55.1
MSCI EM Latin America (Net Return)^^	-3.0	1.3	-6.0	-21.5	40.2

^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.

Sources: BlackRock, Standard & Poor’s Micropal

At month end

Net asset value - capital only:	384.39p
Net asset value - including income:	384.45p
Share price:	352.50p
Total assets#:	£161.6m
Discount (share price to cum income NAV):	8.3%
Average discount* over the month – cum income:	10.5%
Net gearing at month end**:	6.1%
Gearing range (as a % of net assets):	0-25%
Net yield##:	5.0%
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 5.0% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 23.06 cents per share) and using a share price of 492.48 US cents per share (equivalent to the sterling price of 352.50 pence per share translated in to US cents at the rate prevailing at 28 February 2021 of $1.3981 dollars to £1.00).

2020 Q1 interim dividend of 4.59 cents per share (paid on 20 May 2020).
2020 Q2 interim dividend of 5.57 cents per share (paid on 11 August 2020).
2020 Q3 interim dividend of 5.45 cents per share (paid 09 November 2020).
2020 Q4 Final dividend of 7.45 cents per share (paid on 08 February 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	58.7	59.2	61.8
Mexico	25.7	26.0	23.1
Chile	10.7	10.8	7.5
Argentina	4.0	4.0	1.8
Peru	0.0	0.0	3.3
Colombia	0.0	0.0	2.5
Net current assets (inc. fixed interest)	0.9	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 7.1% of the Company’s net asset value.

Sector	% of Equity Portfolio*	% of Benchmark*
Materials	30.9	24.1
Financials	20.5	24.0
Industrials	9.2	6.3
Consumer Discretionary	8.4	6.3
Energy	6.5	8.4
Communication Services	5.5	6.0
Information Technology	5.4	1.8
Health Care	4.6	2.3
Real Estate	4.0	1.0
Consumer Staples	4.0	14.5
Utilities	1.0	5.3
	-----	-----
Total	100.0	100.0
	=====	=====

*excluding net current assets & fixed interest

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Vale – ADS	Brazil	9.2	10.3
Petrobrás – ADR:
Equity	Brazil	4.4	2.6
Preference Shares	Brazil	2.1	3.4
Banco Bradesco - ADR	Brazil	5.9	3.6
B3	Brazil	4.5	3.9
Suzano	Brazil	4.3	1.8
América Movil - ADR	Mexico	4.1	3.9
Walmart de México y Centroamérica	Mexico	4.0	2.7
Cemex – ADR	Mexico	4.0	1.8
Grupo México	Mexico	3.6	2.6
Quimica Y Minera - ADR	Chile	3.5	1.1

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

For the month of February 2021, the Company’s NAV returned –4.1%¹, with the share price moving -5.0%¹. The Company’s benchmark, the MSCI EM Latin America Index, returned -4.7%¹ on a net basis (all performance figures are in sterling terms with dividends reinvested).

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

Stock selection in Mexico contributed the most to relative performance over the period while allocation in Peru detracted most from relative returns. An overweight position in Brazilian pulp and paper company, Suzano, was the biggest stock contributor to relative performance as pulp prices have increased.  An off-benchmark holding in Ternium, the Argentinian flat steel and long steel manufacturer, also benefitted the portfolio as flat steel markets in the US are very tight given a strong rebound in demand. An overweight position in Petrobras, a major Brazilian petroleum company, detracted most from relative returns during the month as the stock declined on the back of concerns over asset sales and corporate governance risk. An overweight position in Brazilian retail company, Via Varejo, also weighed on relative performance despite having a better than expected set of results in the second half of 2020 as increased macro and political risk weighed on the Brazilian equity market as a whole. 

Over the month we added to Brazilian retail company, Via Varejo, as the company saw triple digit growth in online sales and continuation of favourable sales in offline channels despite withdrawal of government stimulus. We initiated a position in Brazilian software company, Locaweb, as the company continues to show a strong position to accelerate their growth in relation to the market. We reduced exposure to Brazilian bank, BTG Pactual, to take profits following the stock’s recent outperformance. We sold our holding of Brazilian online retail company, B2W Companhia, given our low conviction on long-term investment thesis as the company has recently been losing market share to competitors. The portfolio ended the period being overweight to Mexico and Chile, whilst being underweight to Peru and Colombia. At the sector level, we are overweight materials and information technology, and underweight consumer staples and utilities.

COVID-19 has devastated the global economy in 2020, with LatAm hit especially hard. As we look ahead to 2021 we are optimistic that global growth will rebound on the back of increased vaccine distribution as catalysts for a reflation trade.  Despite LatAm equities strong fourth quarter performance, the region remains cheaper than developed markets and emerging markets on both a forward P/E (price to earnings) basis and trailing P/BV (price to book value) basis. We are optimistic on returns for LatAm equities going forward given an economic recovery in 2021 and the strong commodity prices as a tailwind for many commodity rich nations in the region. Furthermore, LatAm equities have benefited from a recent global value rotation in the market, which we expect to continue into the new year. Higher raw material prices should also provide a tailwind for LatAm given the high level of commodity exports across major economies in the region.

At the end of February, we saw increased market volatility as investors assess the credibility of the government’s economic policy in Brazil. We see this as a reminder of how Brazil’s fiscal policy is on thin ice as the pandemic worsens and the country’s spending cap becomes more binding amid a high level of debt. This policy instability is one reason we have been more cautious on Brazilian equities despite fourth quarter GDP (Gross Domestic Product) coming in much stronger than expected. In addition, recent COVID-19 trends have been going against the near-term economic recovery as positive cases and hospitalizations have increased following the increased mobility and social gathering surrounding the annual Carnival holiday.  Our tempered expectations in Brazil have been offset by renewed optimism in Chile as the country has been one of the fastest in the region to deploy vaccines. Chile should continue to benefit from a strong commodity price tailwind, relatively firmer fiscal situation and an opportunity for the economy open up on the back of proactive vaccine purchases and distribution program.

¹Source: BlackRock, as of 28 February 2021.

25 March 2021

ENDS

Latest information is available by typing www.blackrock.co.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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