President Trump’s anti-Mexico rhetoric has made Mexican assets one of the key calls in emerging market debt. I have just returned from a research trip to Mexico where I met with local economists, analysts, and corporate bond issuers. Below are a number of observations from my time there.
Donald Trump won the election on a fairly protectionist rhetoric – with a special focus on Mexico – and the … Read the article
Despite a year of high political turmoil – which of course included the UK EU referendum and the US elections – emerging market assets proved surprisingly resilient to the various global events, even with rising core government yields in the second half of 2016. Given that starting valuations at the beginning of the year, both with respect to credit spreads as well as currencies, were pricing … Read the article
Today’s US election result has several implications for emerging markets. At a first glance, the outcome is clearly negative, given the potential downside risks from increased trade protectionism, anti-immigration measures, large fiscal expansion and steepening of the US yield curve and uncertainty in terms of foreign policy.
These risks are already being reflected in asset prices. Since the re… Read the article
In developed markets, the vast majority of perpetual bonds are contractually subordinated, i.e. it is stated in the bond documentation that they are junior to any senior secured or unsecured debt, and as a result they tend to have lower bond ratings than senior bonds in the same capital structure because they have a lower expected recovery value. In emerging markets, however, it is not uncommon… Read the article
Chaori Solar and Baoding Tianwei will forever remain in the history of China’s bond market. In March 2014 the former became the first defaulter in the country’s onshore bond market whilst the latter turned out to be the first state-owned enterprise (SOE) default in China in April 2015. Since then, 24 other bond defaults occurred in the country, the majority of which in the manufacturing, metals… Read the article
Russian corporate bonds were one of the best performing asset classes last year, with a total return for the JPM CEMBI Russia index of +26%, despite Russia’s GDP dropping by -3.7% on the back of a hugely challenging economic backdrop and geopolitical headwinds. I recently spent a week in the cold of Moscow’s early spring, meeting banks and corporates to help me assess whether the economic sanct… Read the article
The US election campaign has surprised everyone thus far. Candidate Donald Trump has vowed to deport all of the 11 million illegal immigrants currently living in the US. He has also declared that he would impound all remittance payments derived from illegal wages. We have written before how Central America and the Caribbean would benefit from improving US growth and have been invested in variou… Read the article
Much has been discussed on the topic of the optimal level of foreign exchange reserves. One of the common methodologies is the IMF’s ARA (Assessing Reserve Adequacy) metric, which essentially provides a range based on a country’s trade, broad monetary aggregates and external liabilities. How much weight should be given to each factor varies according to the economic structure of each country, i… Read the article
Oil price moves and their impacts on emerging markets will continue to be a hot topic in 2016. It is true that economies which rely heavily on oil exports and fiscal revenues, such as Saudi Arabia, Russia or Venezuela, have been facing an extremely challenging macro environment with the decline in oil prices. But, overall, there are more net oil importers than exporters amongst the developing e… Read the article
Following on from Gordon’s review of the best and worst performing fixed income asset classes last year, I wanted to take a more in depth look at how emerging markets performed in 2015 and what to look out for in 2016.
Some themes that drove the market in 2015 were the same themes than drove it in 2014. Once again, asset allocation was critical. Local currency debt, for the third year running, … Read the article