Investment strategy Correspondent
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Sep 24, 2014

As Ukraine’s debt tangle unwinds, Russia holds key thread

LONDON (Reuters) – A selloff on Ukraine’s dollar debt is focusing attention on a controversial $3 billion bond held by Russia, raising investor concerns that President Vladimir Putin could use the issue to trigger a cascade of defaults across Kiev’s sovereign Eurobonds.

The so-called bail-bond, taken out late last year by former Ukrainian President Viktor Yanukovich, carries a clause which – given Kiev’s steadily worsening finances – may enable the Kremlin to demand immediate repayment.

Sep 24, 2014

Analysis – As Ukraine’s debt tangle unwinds, Russia holds key thread

LONDON (Reuters) – A selloff on Ukraine’s dollar debt is focussing attention on a controversial $3 billion (£1.8 billion) bond held by Russia, raising investor concerns that President Vladimir Putin could use the issue to trigger a cascade of defaults across Kiev’s sovereign Eurobonds.

The so-called bail-bond, taken out late last year by former Ukrainian President Viktor Yanukovich, carries a clause which – given Kiev’s steadily worsening finances – may enable the Kremlin to demand immediate repayment.

Sep 23, 2014

Ukraine Eurobonds plunge as markets sense restructuring pain

LONDON (Reuters) – Ukraine’s dollar bonds suffered a sharp selloff on Tuesday, plunging to multi-month lows as investors priced in the growing probability of debt restructuring and lower recovery rates for bondholders.

While Kiev’s ceasefire with pro-Russian militants in the country’s east is holding, its finances are looking increasingly untenable, with the economy set to shrink 8-9 percent in 2014 and the currency having lost about 40 percent so far this year.

Sep 18, 2014

Investors pricing Russia credit ratings downgrade

LONDON, Sept 18 (Reuters) – Investors are starting to price
the risk of Russia’s credit rating falling to junk if Western
sanctions and Moscow’s response plunge the economy into
recession and deplete its $450 billion reserves.

Being investment grade – at least BBB minus from Standard &
Poor’s and Fitch or Baa3 from Moody’s – allows a borrower to tap
a far wider pool of investors, and losing that ranking would be
likely to cause big outflows from Russian markets.

Sep 16, 2014

Rouble hits new low, at forefront of emerging market losses

LONDON (Reuters) – Expectations of a hawkish tone from the U.S. Fed this week pushed emerging stocks towards their ninth straight day of losses on Tuesday, while in Russia, the rouble tumbled to another record low against the dollar.

The U.S. Federal Reserve meets on Tuesday and Wednesday and is expected to flag the end of its bond-buying program and to provide clues about the timing of its first rate rise. While the dollar has steadied after strong gains last week, emerging assets are increasingly pricing in the prospect of reduced global liquidity.

Sep 14, 2014

Growing foreign fund influence a risk for emerging markets-BIS

LONDON, Sept 14 (Reuters) – The global fund management
industry is a potential source of risk for emerging markets
because of its vast size and herd-like investor behaviour that
can exacerbate asset price fluctuations, a BIS report said on
Sunday.

In its quarterly review, the Bank for International
Settlements said the selloff that rocked emerging economies last
year was a reminder of how “the activity of large asset managers
can significantly affect small and illiquid asset markets”.

Sep 12, 2014

As Fed looms, emerging markets may evade 2013-style rout

LONDON, Sept 12 (Reuters) – Just as vaccines work by
stimulating the body’s immune system, last year’s selloff may
have helped emerging markets build defences against the damage
they have suffered during past U.S. rate rise cycles.

This week’s market moves are rekindling memories of past
emerging market crises, after a paper from the San Francisco
branch of the U.S. Federal Reserve sparked a surge in the
greenback and U.S. yields, an issue which is likely to be
debated at next weekend’s G20 meeting of world powers.

Sep 11, 2014

Assets steady from big fall; sanction threat weighs on Russia

LONDON, Sept 11 (Reuters) – Emerging stocks eased slightly
to touch new three-week lows on Thursday and most currencies
steadied from large losses earlier in the week but the prospect
of new EU sanctions kept Russian markets under pressure.

The dollar traded just off 14-month highs against a basket
of major currencies and U.S. 10-year yields stood just off
one-month peaks, following robust gains fuelled by a San
Francisco Fed research paper that showed markets could be
underestimating the magnitude and speed of U.S. rate rises next
year.

Sep 10, 2014
via Global Investing

Bleak investment outlook sours mood at Russia forum

By Alexander Winning

What are the chances that Western investors will rush back to Russia if a shaky ceasefire in Ukraine leads to a more lasting peace? Pretty slim, judging by a keynote speech at a recent Russia-focused investment conference in London.

Dmitri Trenin, director of the Carnegie Moscow Centre, told the conference organised by Sberbank CIB, the investment-banking arm of Russia’s top state-controlled lender, there was little prospect of significant Western investment in Russia over the next 5 years:

Sep 10, 2014

Emerging-market currency turbulence picks up, options markets flash red

LONDON, Sept 10 (Reuters) – The cost of hedging against
sharp fluctuations in many emerging-market currencies jumped to
multi-month highs on Wednesday, and derivatives markets indicate
that bets against them are on the rise as the dollar
strengthens.

A rising dollar and higher Treasury yields are spooking
investors engaged in dollar-based carry trades – borrowing at
low interest rates to invest in a higher-yielding, riskier
asset. The result has been a sudden spike in volatility, after
it spent the summer trading near long-term lows.