EMs to Bernanke: *YAWN*
Rising US interest rates along with a China hard landing have long been cited as two of the biggest risks to emerging markets assets.
So how did the markets react to the relatively hawkish comments made on Wednesday by Ben Bernanke, chairman of the Federal Reserve, and the sluggish manufacturing data that came out of China on Thursday?
Pretty much with a shrug. Continue reading »
[video] Tigers of the wild frontier
The global hunt for yield drove investors on Thursday to offer Rwanda almost half its GDP as its bond offer was wildly oversubscribed. James Mackintosh, investment editor, analyses the demand for Africa’s tigers despite three defaults this year in frontier markets.
Rwanda and Costa Rica: riding the wave of cheap money
What does Rwanda, a poor African country that has suffered a horrific war and genocide, have in common with Costa Rica, a Central American country of 4.5m best known for its beaches and high-quality coffee beans?
Answer: Both are the latest to benefit from the wave of cheap money looking for returns, by issuing debt at ridiculously low rates. Continue reading »
EM private debt funds draw interest
To the growing list of ways for investors to play the emerging market growth story, add this: private debt funds.
Cordiant Capital, a Canada-based fund manager, is the latest to add to this small but growing sector with the launch of a $250m fund on Monday. Continue reading »
Record week for EM bond issuance
Whatever happened to the “great rotation“? Wasn’t 2013 supposed to be the year when investors finally took their cash out of bonds and put it to work in equities?
Judging by the record week emerging market bonds have had, EM equities bulls might have some waiting to do yet. Continue reading »
EM bond defaults: new high
2012, as beyondbrics readers know, was a record year for emerging markets bonds. But it turns out it was also a record year for defaults.
According to a new report out from Standard & Poor’s, defaults among EM corporate issuers accounted for about 30 per cent of global corporate defaults by issuer count – the highest in the 16 years since the rating agency started keeping scores. Continue reading »
Grenada debt: get ready for a haircut
Judging by the amount of small nations that have been having trouble with paying their debts lately, it would seem reasonable to conclude that size does in fact matter.
Forget about Cyprus, in the Caribbean alone Grenada became the third country this year to embark on a debt restructuring, following the examples of Jamaica and Belize, with Keith Mitchell swiftly announcing less than a month after he was elected prime minister that Grenada needed “a fresh start”. Continue reading »
EM bonds: yield hunt reaches Honduras and aims for Papua New Guinea
It’s not gentrification, it’s desperation. What can be said of the current scramble for real estate in the poorer corners of Brooklyn, New York – can arguably also be applied to emerging markets bonds at the moment.
With yields from big, traditional EMs – like Mexico and Brazil – low, EM bond investors, much like the homeseekers priced out of the established bits of Brooklyn, are diving deeper into unfamiliar parts of the EM world in their quest for returns. Last week Honduras, a poor Central American country with the world’s highest murder rate, made its international bond debut, raising $500m. Continue reading »
Jamaica’s crisis debt swap
Jamaica might be best known for its sunny beaches, reggae music and world class athletes such as Usain Bolt. But this Caribbean island nation of 2.9m is increasingly garnering international attention for something less boast-worthy : its crippling debt crisis.
In a television address late Monday, the country’s prime minister Portia Simpson Miller said the government will launch a restructuring of its local debt – its second in three years – as it looks to stave off a “serious economic crisis” and secure a credit line from the IMF. Continue reading »
EM subordinated bonds: the must-have for 2013?
First it was investment grade bonds. Then it was high yields. Could subordinated debt be the next must-have asset for emerging markets investors?
On Friday, Banco do Brasil raised $2bn through the sale of a perpetual subordinated bond.
The issue, which carries an interest rate of 6.25 per cent a year, attracted $16.3bn in orders – a fierce level of demand given that it is a subordinated bond, meaning buyers are relegated to the lower rungs of a company’s capital structure and would not be the first to recover their capital if there is a default. Continue reading »
EM corporate bonds: getting frothy?
With about $300bn issued last year and a similar amount expected this year, surely the market for EM corporate bonds is getting a bit frothy?
Brett Diment, head of emerging markets and sovereign bonds at Aberdeen Asset Management, says not. And although he points to some reasons for caution, he thinks this is a market that still has legs. Continue reading »
El Salvador and Mongolia: solid bet, or bubble?
Is El Salvador, a poor Central American country struggling to overcome a violent history, a safer bet than Portugal? And is Mongolia, a country that has been rescued five times in the past 22 years by the International Monetary Fund, a better investment thesis than Spain?
Bond investors seem to think so. Continue reading »
Guest post: why EM bonds are strong, cheap – and safe
By Jan Dehn of Ashmore Investment Management
Emerging market bonds have performed well this year. Sovereign debt has returned nearly 16 per cent. Corporate high yield has returned nearly 17 per cent and local currency bonds about 14 per cent. So is it time to run for the hills?
The answer is emphatically ‘no’. Continue reading »
The volume may be similar, but the names are changing. That’s likely to be the story of emerging market soveriegn debt in 2013, according to a report from Barclays, as lots of first time issuers look to tap the markets.
And rather than big benchmark issuers such as Turkey, South Africa and Russia driving the supply of hard-currency bonds, the biggest issuer next year may well be Indonesia. Continue reading »
AllianceBernstein: slowdown in foreign exchange reserves growth signals end to cheap money flows into EMs
Could emerging market borrowers’ appetite for cheap developed world credit be finally easing?
A slowing of the huge growth in the EM’ foreign exchange reserves could point in that direction. So says Lars Pederson of fund manager Alliance Bernstein who says demand for foreign credit could be weakening because of concerns over possible local currency depreciation, worries about accumulated foreign debt holdings and a lack of suitable investment projects. Whatever the reasons, the easy money party is nearly over. Continue reading »
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