Last year was one that most emerging market investors would probably like to forget. MSCI’s main equity index fell 5 percent, bond returns were 6-8 percent in the red and some currencies lost up to 20 percent against the dollar. Here are some flow numbers from EPFR Global, the Boston-based agency that released some provisional annual data to its clients late last week.
While funds dedicated to developed markets — equities and bonds – received inflows amounting to over 7 percent of their assets under management (AUM), funds investing in emerging stocks lost more than 6 percent of their AUM.
By Sujata Rao
LONDON, Jan 3(Reuters) – If the medicine tastes bad, it’s
probably doing you good. Emerging economies might console
themselves with that thought when they’re suffering market
cramps and haemorrhaging capital as the U.S. ends its monetary
The Federal Reserve will begin winding down, or tapering,
its $85 billion-a-month money-printing programme this month, and
emerging markets are seeing foreign investment pull back as a
result. Last year, around $30 billion fled emerging equity and
bond funds tracked by EPFR Global, provisional data shows.
LONDON (Reuters) – If the medicine tastes bad, it’s probably doing you good. Emerging economies might console themselves with that thought when they’re suffering market cramps and hemorrhaging capital as the U.S. ends its monetary stimulus.
The Federal Reserve will begin winding down, or tapering, its $85 billion-a-month money-printing program this month, and emerging markets are seeing foreign investment pull back as a result. Last year, around $30 billion fled emerging equity and bond funds tracked by EPFR Global, provisional data shows.
ISTANBUL/LONDON, Dec 31 (Reuters) – Reeling from a
corruption scandal in the upper levels of the Turkish
government, investors in the country’s financial markets may
face many more months of instability as they price in political
risks they have ignored for years.
While politics is often centre-stage for investors in
emerging markets, it became something of a sideshow during
Turkey’s economic miracle of the past decade, thanks to red-hot
growth rates and the firm grip of Prime Minister Tayyip
Erdogan’s AK Party on power.
LONDON, Dec 31 (Reuters) – When Brazilian oil firm OGX tried
to tap bond markets for $2 billion in 2011, investors were ready
to hand it $5.5 billion. Two years on, OGX is in default and the
debt trades at less than 10 cents of its original face value.
The spectre of such defaults spreading across emerging
markets has not yet dimmed investor enthusiasm for the corporate
debt sector, which saw record-high bond sales of $330
billion-plus in 2013 and more than 150 first-time borrowers.
LONDON, Dec 24 (Reuters) – Emerging market dollar bond sales
hit record highs of $450 billion this year, surprising industry
players who had predicted issuance to suffer from the threat of
U.S. monetary stimulus withdrawal.
Worries about the squeezing of the U.S. lifeline that had
fuelled demand for risky assets drove money from emerging market
debt funds and hit returns in 2013, after several years of
inflows and double-digit gains.
Ukraine said today it was issuing a $3 billion in two-year Eurobonds at a yield of 5 percent in what seems to the start of a bailout deal with Russia. That sounds like a good deal for Kiev — its Eurobond maturing next year is trading at at a yield of 8 percent and it could not reasonably expect to tap bond markets for less than that. In addition, Ukraine is also getting a gas price discount from Russia that will provide an annual saving of $2.6 billion or so.
But what about Russia? Whether the bailout was motivated by “brotherly love” as Putin claims or by geo-politics, it sounds like a rotten deal for Moscow. The credit will earn it 5 percent on what is at best a risky investment. What’s more the money will come out of its rainy day fund which had been earmarked to cover future pension deficits. State gas company Gazprom will have to stomach a 30 percent price cut, which according to Barclays analysts is “a reminder of the risks of Gazprom’s quasi-sovereign status.”
Are Mr and Mrs Watanabe preparing to return to emerging markets in a big way?
Mom and pop Japanese investors, collectively been dubbed the Watanabes, last month snapped up a large volume of uridashi bonds (bonds in foreign currencies marketed to small-time Japanese investors), and sales of Brazilian real uridashi rose last month to the highest since July 2010, Barclays analysts say, citing official data.
Just to remind ourselves, the Watanabes have made a name for themselves as canny players of the interest rate arbitrage between the yen and various high-yield currencies. The real was a red-hot favourite and their frantic uridashi purchases in 2007 and 2009-2011 was partly behind Brazil’s decision to slap curbs on incoming capital. Their ardour has cooled in the past two years but the trade is far from dead.
LONDON, Dec 18 (Reuters) – A jump in prices of Ukraine’s
dollar bonds since Russia offered a $15 billion bailout has
vindicated some of the world’s biggest investors who bet
billions that the high-yield, high-risk creditor could avert
President Vladimir Putin’s promise to buy Ukrainian debt in
a deal dictated more by geopolitics than economics has postponed
rather than eliminated the risk of Kiev defaulting.
LONDON, Dec 13 (Reuters) – Kazakh-owned Alliance Bank needs
recapitalisation to restore profitability, a process that must
involve all its shareholders and bondholders, its CEO said on
Friday, as the bank’s dollar debt sank to record lows.
Timur Isatayev also told Reuters in an interview that
Alliance, in which sovereign wealth fund Samruk-Kazyna owns a 67
percent stake, would not be paying out on recovery notes (RN)
due on Dec. 25, as part of the measures to restore liquidity.