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BlackRock Latin American Investment Trust Plc - Portfolio Update

By PR Newswire

PR Newswire

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at 30 September 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^ -1.1 14.3 22.3 20.7 14.3 100.0
Share price 0.3 18.1 23.8 19.5 16.0 90.2
MSCI EM Latin America -2.4 11.5 22.0 20.9 10.9 114.6
US Dollars:
Net asset value^ 3.0 18.0 26.4 -0.1 -4.9 55.0
Share price 4.4 22.0 27.9 -1.1 -3.6     47.3
MSCI EM Latin America 1.6 15.1 26.0 0.1 -7.9 66.0

^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: 537.53p
Net asset value – cum income: 543.54p
Share price: 481.50p
Total Assets#: £231.0m
Discount (share price to cum income NAV):  11.4%
Average discount* over the month – cum income: 12.4%
Net gearing at month end**: 7.2%
Gearing range (as a % of net assets): 0-25%
Net yield##: 2.4%
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 64.0 64.5 57.6
Mexico 24.1 24.2 26.4
Argentina 5.1 5.1 0.0
Peru 3.5 3.6 3.0
Chile 1.8 1.8 9.6
Panama 0.4 0.4 0.0
Colombia 0.4 0.4 3.4
Net current assets (inc.Fixed interest) 0.7 0.0 0.0
----- ----- -----
Total 100.0 100.0 100.0
----- ----- -----

   

Sector % of Equity Portfolio * % of Benchmark
Financials 33.3 31.4
Consumer Staples 17.1 16.6
Materials   12.4       14.9
Consumer Discretionary 12.4 6.5
Energy 8.5 8.0
Telecommunication Services 5.7 6.3
Industrials 5.6 6.1
Real Estate 1.5 1.5
Utilities 1.5 6.2
Information Technology 1.1 1.3
Health Care 0.9 1.2
----- -----
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 7.7 6.7
Banco Bradesco Brazil 7.1 6.6
Petrobras Brazil 6.2 5.2
Vale Brazil 5.3 4.6
Ambev Brazil 5.1 4.8
America Movil Mexico 3.7 4.5
Femsa Mexico 3.5 2.8
Grupo Financiero Banorte Mexico 3.3 2.6
B3 Brazil 3.2 2.4
Credicorp Peru 2.7 2.1

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

For the month of September 2017, the Company’s NAV fell by 1.1% with the share price rising by 0.3%. The Company’s benchmark, the MSCI EM Latin America Index, fell by 2.4% (all performance figures are in sterling terms with income reinvested and are net of ongoing charges).

Our overweight to and selection within Brazil was the primary contributor to performance over the period on the back of another round of interest rate cuts in September, with the Central Bank leaving the door open for further action later in the year, and inflation surprising to the downside. Petrobras was among the top contributors rallying alongside the broader Brazilian market, and further supported by a strong month for oil. Brazilian railway logistics firm, Rumo, also performed well as shareholders approved a capital raise plan, which should improve the company’s positioning in their concession renewal negotiations and ease financing terms with BNDES (Brazilian Development Bank). Off-benchmark Argentinean exposure continued to benefit the portfolio. Financials positioning did particularly well as positive news surrounding mid-term elections and support for President Macri’s reform policies has also come through in the polls, helping the market rebound from June/July weakness. Lender Grupo Supervielle, was the top performing stock over the period. On the other hand our underweight to Chile marginally weighed on performance. Specifically, our lack of positioning in materials name, SQM, detracted as the stock has largely been supported by strong Lithium price momentum. Exposure to Vale and Bradespar (holding company for Vale) were among the top detractors as iron ore prices declined.

During the quarter, we increased exposure to Brazilian domestic consumption-oriented names deploying some cash towards the Magazine Luiza follow-on offering, while also bulking up positions in Lojas Americanas and Lojas Renner. We also increased exposure to our Grupo Supervielle position in Argentina, while also participating in a follow-on offering from Grupo Galicia, further illustrating our conviction in the growth and increased penetration of the consumer-focused, Argentine banking sector. We reduced exposure to Mexico. We sold down our position in the Mexican airline, Volaris, as pricing pressure in Mexico City intensifies as the Aeromexico/Delta joint venture has been seen to be ramping up capacity more than expected. We also sold down our Grupo Bimbo position, using the proceeds to buy Gruma on the back of better growth and value dynamics. The portfolio ended the month being overweight Brazil and Peru while being underweight Chile, Colombia, and Mexico. We also maintain an off-benchmark allocation to Argentina. At the sector level, we are overweight the domestic consumer, while being underweight utilities and materials.

As we enter the fourth quarter of the year, our positioning and outlook remain relatively unchanged. We continue to be overweight Brazil, and off-benchmark Argentina, while being underweight Chile, Colombia and Mexico. Despite going through yet another round of political headwinds 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 (the Central Bank cut rates another 100 basis points in September to 8.25% - 600 basis points of easing so far during the current cycle); and b) continued progress on the reform agenda, especially pension reform, which should help to bring stability to government accounts in the medium term. However, with a second accusation brought against President Temer, the timeframe for further action on social reforms will likely move to after the 2018 elections. Meanwhile, the recent round of NAFTA (North American Free Trade Agreement) negotiations illustrated that the process will be long and, and we maintain our cautious view on Mexican growth, and therefore our underweight position - uncertainties regarding next year’s presidential cycle add to our conviction on such positioning. We continue to underweight 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 October mid-term elections expected to give a boost to President Macri’s reform agenda.

18 October 2017

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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