Investment strategy Correspondent
Sujata's Feed
Jan 29, 2014

Turkish rate hike boost fades, focus on S.Africa c.bank

LONDON, Jan 29 (Reuters) – The boost to Turkey’s lira from a
round of huge interest rate hikes quickly faded on Wednesday,
while the rand fell as the market focus switched to monetary
policy decisions due later in the day in South Africa and from
the U.S. Federal Reserve.

Turkish debt insurance costs fell and the country’s recent
dollar bond rallied after the central bank jacked up all of its
interest rates late on Tuesday, in a move investors saw as long
overdue.

Jan 29, 2014

Turkish rate hike boost starts to fade, S.Africa faces pressure

LONDON, Jan 29 (Reuters) – Turkey’s lira posted its biggest
one-day gain in more than five years on Wednesday after huge
interest rate hikes, but the impact was already starting to
fade, while South Africa now also faces pressure to tighten
policy.

Turkish debt insurance costs slumped and its sovereign bond
yield premia to U.S. Treasuries fell 20 basis points.

Jan 28, 2014

Emerging markets as vulnerable as ever to contagion

LONDON/NEW YORK/SINGAPORE, Jan 27 (Reuters) – Emerging
markets may be unrecognisable from the small and fragile
economies that fell like dominoes 15 years ago, but they are
just as vulnerable today to the same sort of indiscriminate
selling when investor panic sets in.

As even the relatively robust economies of Mexico and Poland
now feel the heat from disparate flashpoints from Turkey to
Argentina, there are growing doubts that emerging markets have
built any immunity to such contagion.

Jan 27, 2014

Analysis: Emerging markets as vulnerable to contagion as ever

LONDON/NEW YORK/SINGAPORE (Reuters) – Emerging markets may be unrecognizable from the small and fragile economies that fell like dominoes 15 years ago, but they are just as vulnerable today to the same sort of indiscriminate selling when investor panic sets in.

As even the relatively robust economies of Mexico and Poland now feel the heat from disparate flashpoints from Turkey to Argentina, there are growing doubts that emerging markets have built any immunity to such contagion.

Jan 27, 2014

Emerging markets as vulnerable to contagion as ever

LONDON/NEW YORK/SINGAPORE Jan 27 (Reuters) – Emerging
markets may be unrecognisable from the small and fragile
economies that fell like dominoes 15 years ago, but they are
just as vulnerable today to the same sort of indiscriminate
selling when investor panic sets in.

As even the relatively robust economies of Mexico and Poland
now feel the heat from disparate flashpoints from Turkey to
Argentina, there are growing doubts that emerging markets have
built any immunity to such contagion.

Jan 27, 2014

Turkish lira recovers, Brazil real drops in 3rd day of EM rout

LONDON/RIO DE JANEIRO, Jan 27 (Reuters) – The Turkish lira
rebounded on Monday after the central bank called an emergency
meeting, but Brazil’s real resumed its slide on fears the recent
sell-off in emerging markets could spread, potentially derailing
the global economic recovery.

Currencies and stocks in Asia and Eastern Europe suffered a
fresh bout of selling early on Monday but trimmed losses later
after Latin American markets opened mostly in the black.

Jan 15, 2014

Russia rouble float may hurt investors now but help in long run

LONDON, Jan 15 (Reuters) – Russia’s move towards a flexible
rouble exchange rate may well prove a boon for the struggling
economy, but foreign stock and bond investors should brace for
short-term losses as the currency finds a new level.

The Russian central bank this week scrapped so-called
targeted interventions, bringing an end to hard currency sales
of up to $60 million a day and indicating that a planned shift
to a fully floating rouble on Jan. 1, 2015, is on track.

Jan 10, 2014

Emerging market bond sales make bumper start to 2014

LONDON, Jan 10 (Reuters) – Emerging markets have kicked off
their 2014 borrowing campaigns in style, with bond sales since
the start of the year up 64 percent from year-ago levels and
hefty order books contrasting with weakness in broader emerging
assets.

The Philippines weighed in with a $1.5 billion bond on
Friday, securing orders of $14 billion, or a subscription rate
of nine times, a record for the country.

Jan 8, 2014
via Global Investing

Market cap of EM debt indices still rising

It wasn’t a good year for emerging market bonds, with all three main debt benchmarks posting negative returns for the first time since 2008. But the benchmark indices run by JPMorgan nevertheless saw a modest increase in market capitalisation, and assets of the funds that benchmark to these indices also rose.

JPMorgan says its index family — comprising EMBI Global dollar bond indices, the CEMBI group listing corporate debt and the GBI-EM index of local currency emerging bonds — ended 2013 with a combined market cap of $2.8 trillion, a 2 percent increase from end-2012. Take a look at the following graphic which shows the rise in the market cap since 2001:

Jan 6, 2014
via Global Investing

Waiting for current account improvement in Turkey

The fall in Turkey’s lira to record lows is raising jitters among foreign investors who will have lost a good deal of money on the currency side of their stock and bond investments.  They are also worrying about the response of the central bank, which has effectively ruled out large rate hikes to stabilise the currency. But can the 20 percent lira depreciation seen since May 2013 help correct the country’s balance of payments gap?

Turkey’s current account deficit is its Achilles heel . Without a large domestic savings pool, that deficit tends to blow out whenever growth quickens and the lira strengthens . That leaves the country highly vulnerable to a withdrawal of foreign capital. Take a look at the following graphic (click on it to enlarge) :