BlackRock Latin American Investment Trust Plc - Portfolio Update

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at 28 February 2019 and unaudited.

Performance at month end with net income reinvested   

^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

#Total assets include current year revenue.
##Calculated using total dividends declared in the last 12 months as at the date of this announcement (comprising, the 2017 final dividend of 7.00 cents per share, the first interim dividend under the new policy of 7.57 cents per share paid on 23 August 2018, the second interim dividend under the new policy of 7.85 cents per share paid on 9 November 2018 and the third interim dividend under the new policy of 8.13 cents per share declared on 2 January 2019 paid on 8 February 2019) as a percentage of month end share price. As previously announced, the Board of the BlackRock Latin American Investment Trust plc have introduced a new dividend policy whereby the Company will pay regular quarterly dividends equivalent to 1.25% of the Company’s US Dollar cum income NAV on the last working day of December, March, June and September each year, with the dividends being paid in February, May, August and November each year respectively. The yield on the Company’s shares projecting future quarterly dividends forward based on the August and October 2018 paid dividends and 2 quarters being paid at the same rate as the declared January 2019 dividend, based on the Company’s share price at 28 February 2019 converted to US dollars at the exchange rate on 28 February 2019, would be 5.2%.
*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 2017.

Geographic Exposure

*excluding net current assets & fixed interest

Ten Largest Equity Investments (in percentage order)

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

For the month of February 2019, the Company’s NAV returned -5.9%¹ with the share price moving -2.8%¹. The Company’s benchmark, the MSCI EM Latin America Index, returned -4.8% (on both a gross and net basis)² (all performance figures are in sterling terms with dividends reinvested).

Latin America underperformed both Emerging and Developed Markets in February as currency depreciation led market declines in Argentina, Brazil, and Mexico. Chilean exposure was the Company’s largest contributor to returns as the country outperformed the region despite falling by 2.8% during the month. Copper miner, Antofagasta, was among the top performers as Copper gained 5.9% alongside a broader rally in commodity prices. Selection in Brazil was also a net positive benefit for the Company. Oi, our preferred telecom name, was the month’s top performer as the stock rallied alongside positive reform momentum for the Bolsonaro administration. Similarly, Minas Gerais utility, CEMIG, also showed resilience in February, supported by increased privatization expectations. On the other hand, our off-benchmark positions in Argentina weighed on performance. The market corrected almost -11%, due to a mixture of currency weakness and a temporary loss of investor confidence following a misunderstanding regarding the MSCI’s reclassification decision. Pampa, and lender, Banco Macro, were among the worst performers and Brazilian beverage name, Ambev, was the largest detractor in February.

Broad positioning was relatively unchanged over the month, with Brazil remaining our largest overweight holding. However, we have continued to reduce exposure there, while topping up positions in Argentina, Mexico, and Chile. This has been consistent with the process and risk profile enhancements Ed Kuczma and Sam Vecht have implemented since taking on portfolio manager responsibilities for the Company on 24 December 2018. Specifically, acknowledging that macroeconomic and political variables can be a major hurdle or supportive factor in the region, we have, more explicitly, integrated a higher degree of macroeconomic research into our investment process. A focus on changes in currency, credit, commodities, and the domestic consumer will help provide a basis for sectoral and country allocations going forward. At the stock level, we aim to partner more closely with BlackRock’s Active Equity Integration & Data Team to use ‘bigdata’ tools and analytics to help answer questions integral in building more comprehensive investment theses and adding conviction to our trades. The expected result is a marginally more concentrated portfolio that will be more dynamic and deliberate in its use of leverage to generate a more consistent alpha experience for our investors.

The portfolio ended the month being overweight in Brazil and Mexico, while being underweight in Chile, Peru, and Colombia. We also maintain an off-benchmark allocation to Argentina. At the sector level, we are overweight to the domestic consumer and real estate sectors, whilst being underweight in utilities and financials.

Brazil remains our largest overweight, given our positive expectations for the incoming administration. So far President-elect Jair Bolsonaro has delivered on his campaign promises, looking to reduce the size of government by initially reducing the number of ministries, naming sector/subject experts to lead cabinets, and pointing to a continuation of the reform process initiated two years ago. Meanwhile, the outlook for upcoming corporate results point to a continuation in the economic recovery, providing strong momentum for growth into 2019. Elsewhere, the cancellation of NAIM (the New Mexico International Airport) reminded markets of the concerns regarding increasing populism for the incoming administration in Mexico, reiterating our cautiousness with Mexican equities. We remain underweight the Andean region due to a combination of unattractive valuation and disappointing growth. Finally, the dramatic sell off in Argentina in 2018 leaves the stocks trading at attractive valuations while interest rates and the currency have mostly stabilized providing a foundation for the economy to rebound from recent downturn.

Sources:
¹BlackRock as at 28 February 2019
²Datastream as at 28 February 2019

12 March 2019

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.