LONDON, June 18 (Reuters) – Wild exchange rate swings in the
yen are giving investors an added incentive to sell holdings of
the emerging debt that not so long ago was billed as one of the
prime beneficiaries of Japan’s money-printing drive.
For an asset class that is already under pressure from
higher U.S. bond yields, this is bearish. For carry trade
investors – those who borrow a low interest rate currency, in
this case the yen, to invest in a higher-yield foreign asset -
sudden strengthening can wipe out gains almost overnight.
What goes in, can come out. And the more that goes in, the more than can come out. That’s what emerging economies have been finding out in recent weeks as capital flees their stock and bond markets.
Take the case of Russia. It’s decision last year to allow foreigners to access its domestic bonds more easily led to a boom in its OFZ or rouble debt, market, with many analysts reckoning OFZs could receive inflows of almost $50 billion in 2013-2014.
LONDON, June 13 (Reuters) – Equities in emerging markets
slumped 2 percent to 11-month lows on Thursday and local
currencies slid as investors piled into the relatively safe
Japanese yen, driven by fears of future global central banks’
Central banks from India to Turkey have acted this week to
stem currency losses and on Thursday the Indonesian rupiah was
buoyed by a surprise central bank rate rise.
LONDON (Reuters) – The $1 trillion market in emerging corporate bonds could be headed for a surge in defaults if company earnings in swiftly depreciating roubles or pesos fail to keep pace with dollar-based debt repayments.
As the U.S. Federal Reserve considers when to turn off its printing presses, emerging currencies have crashed to multi-year lows against the dollar. That rout is a big risk for corporate debt, which has gone from being a sideshow of the sovereign bond market to an asset class that surpasses U.S. junk debt in size.
LONDON, June 12 (Reuters) – The $1 trillion market in
emerging corporate bonds could be headed for a surge in defaults
if company earnings in swiftly depreciating roubles or pesos
fail to keep pace with dollar-based debt repayments.
As the U.S. Federal Reserve considers when to turn off its
printing presses, emerging currencies have crashed to multi-year
lows against the dollar. That rout is a big risk for corporate
debt, which has gone from being a sideshow of the sovereign bond
market to an asset class that surpasses U.S. junk debt in size.
LONDON, June 12 (Reuters) – MSCI, the most widely used
equity index provider, prompted market fears about both Greece
and Egypt on Wednesday, after demoting the former and then
raising concerns about getting money out of the latter.
MSCI redesignated Greece an emerging market late on Tuesday,
12 years after its promotion from the category, assigning it a
tiny 0.3 percent weighting – far less than it had when last in
the emerging index.
LONDON, June 10 (Reuters) – Colombia’s economy faces its
greatest risks this year from instability in neighbouring
Venezuela and the slump in commodity prices, the country’s
finance minister said on Monday.
Growth forecasts for the Andean country are likely to be
downgraded, with 4.4-4.5 percent a likely rate for 2013,
Mauricio Cardenas told Reuters editors and Reuters Television.
LONDON, June 7 (Reuters) – Major developing countries with
big foreign financing needs are acutely vulnerable to the risk
of a sudden stop in investment flows which has unnerved emerging
markets in recent weeks.
Emerging economies such as South Africa, Indonesia, India,
Turkey and Poland are on the front line as investors reconsider
exposure to markets which have attracted trillions of dollars of
cheap money printed by developed world central banks.
The dog that didn’t bark was how the IMF described inflation. But might the fall in emerging market currencies reverse the current picture of largely benign inflation?
Nick Shearn, a portfolio manager at BlueBay Asset Management, sees the rise in inflation as not an if but a when, which makes inflation-linked bonds (linkers in common parlance) a good idea. These would hedge not only against EM but also G7 inflation — he calculates the correlation between the two at around 0.8 percent. He says linkers outperform as inflation uncertainty increases, hence:
LONDON, June 6 (Reuters) – Brazil’s move to drop a tax on
foreign buying of domestic debt will allow more of its bonds to
join two JPMorgan indexes, potentially boosting inflows by at
least $2.8 billion, the bank said on Thursday.
The removal of the 6 percent IOF tax, imposed in 2010 to
fend off so-called hot money flows, could bring up to $30
billion into the local bond market, according to some estimates.