Tag Archives:

oil

Panoramic Weekly: October pest

In true market fashion, both stocks and bonds suffered in October, hit by concerns about the effects of rising rates and trade wars on economic growth and corporate profitability. The past month brought evidence of a slowdown, particularly in Europe and Asia: third quarter GDP growth in the Eurozone came in below expectations, dragged down by Italy’s flatness, while in Asia, Industrial Output i…

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Panoramic Weekly: Stars and Strikes

Global bond markets reacted sharply to Wednesday’s release of US Services data, which struck its best mark in 21 years: US 10-year yields spiked to 3.2%, the highest since 2011, while the dollar reversed a gloomy September to recover its August level. The usually less reactive 30-year Treasury yields surged, leading some investors such as M&G fund manager Richard Woolnough to argue that the mar…

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How vulnerable are Emerging Markets to Trade Wars?

Emerging Markets Portfolio Manager Claudia Calich analyses the potential effects of an escalation of the US-China trade tensions on Emerging Markets. Despite the diplomatic rows and all the column inches written, Claudia discusses how popular products such as French wine and cheese will always find their way to the end consumer, no matter how many barriers along the way. Calich also explains wh…

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Bahrain: avoiding the first sovereign sukuk default?

Bahrain spreads have widened in recent months, despite the rise in oil prices. The market is focusing on the $750 million Bahrain Sukuk maturing on November 22, 2018. Given that the country’s international reserves are estimated at around $2.1 billion, the country will need additional funding to repay it.  The market consensus is that Bahrain will receive financial support from neighbouring Sau…

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Fossil fuels – The end is nigh

Fossil fuels – The end is nigh

There’s no doubt that the oil industry has seen better days. Adding to present-day woes of price levels of $30-40 per barrel are questions about the long-term viability of the industry’s business model as a whole. Take for example the Rockefeller dynasty and Saudi Arabia, two names synonymous with gigantic fortunes built on oil. Well, the Rockefeller Family Fund just announced its intent to div…

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Oil is everywhere. But what matters most are the idiosyncratic stories. Within this context, it is fair to say that an emerging market bond portfolio is unlikely to be fully immune to oil. Looking into 2016, this is good news if you are bullish oil: any significant oil price increase will in most cases drive a rally in emerging market assets. If you are bearish oil, you may still find interesting investment opportunities: the Oil & Gas sector in emerging markets generated a negative return of -3.0% in 2015 but the dispersion of corporate bond returns was huge and not necessarily correlated to oil prices. For instance, the fall in Petrobras bonds was more driven by the ongoing corruption scandal in Brazil and the group’s debt levels than the actual decline in oil prices. On the other hand, despite their country exposure, PDVSA (Venezuelan state-owned oil company) or LUKOIL (Russia-based oil producer) bonds had double-digit total returns in 2015. In what might be a good lesson for 2016, it shows that in emerging markets, in many cases, macro and credit idiosyncratic stories matter more than oil.

Oil price slump is a drag on emerging markets. But wait, why?

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…

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