Investment strategy Correspondent
Sujata's Feed
Dec 24, 2013

Emerging debt sales hit surprise record in 2013, outlook upbeat

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.

Dec 19, 2013
via Global Investing

Ukraine aid may pay off for Kremlin

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.”

Dec 19, 2013
via Global Investing

Watanabes shop for Brazilian real, Mexican peso

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.

Dec 18, 2013

Ukraine bond rally rewards audacious big-name investors

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
default.

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.

Dec 13, 2013

Kazakhstan’s Alliance Bank needs recapitalisation; won’t make Dec payment on notes-CEO

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.

Dec 13, 2013

Kazakhstan’s Alliance Bank has $600mln shortfall; won’t make Dec payment on notes-CEO

LONDON, Dec 13 (Reuters) – Alliance Bank, majority owned by
oil-rich Kazakhstan’s sovereign wealth fund, needs
recapitalisation to restore profitability, a process that must
involve all its shareholders and bondholders, its CEO said on
Friday.

Timur Isatayev also told Reuters in an interview that
Alliance, in which 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.

Dec 13, 2013
via Global Investing

Russia’s people problem

President Vladimir Putin is generally fond of blaming the West for the ills besetting Russia. This week though, he admitted in his State of the Nation speech that the roots of Russia’s sluggish economy may lie at home rather than abroad.  The government expects the economy to expand a measly 1.4 percent this year (less than half of the growth the US is likely to see) and long-term growth estimates have been trimmed to 2.5 percent a year.

Much of that is down to the lack of reform which has left many big companies in the state’s (generally wasteful) hands, weak rule of law that deters investment and capital flight to the tune of tens of billions of dollars a year. Yet there is another factor that could be harder to fix — Russia’s poor demographic profile. The population started declining sharply in the early 1990s amid political and economic turmoil, falling by 3.4 million in the 2000-2010 decade, according to census data. The impact is set to be felt sharply from now on, exactly when children born in 1990s would have started entering the workforce.

Dec 13, 2013

Ukraine’s currency hits four-year low as weekend protests near

LONDON, Dec 13 (Reuters) – Ukraine’s hryvnia slipped to new
four-year lows on Friday while depreciation bets on the currency
intensified on expectation that the near-bankrupt country will
hurtle into crisis without a speedy aid infusion.

Across other emerging markets, currencies came under
pressure against the dollar ahead of next week’s meeting of the
U.S. Federal Reserve which some expect will signal the start of
the stimulus wind-down.

Dec 12, 2013

Ukraine tests Templeton star Hasenstab’s contrarian style

LONDON, Dec 12 (Reuters) – The bet paid off in Ireland and
it paid off in Hungary but star bond investor Michael
Hasenstab’s faith in distressed countries honouring their
sovereign debts faces an even bigger test in Ukraine.

For the moment at least the fate of a $5 billion-plus punt
on Ukraine government debt by the Franklin Templeton manager
does not look promising. Political tensions are roiling Ukraine;
less than $20 billion stand between it and a huge
devaluation-cum-default combo.

Dec 11, 2013

Ukraine debt insurance costs move back towards four-year high

LONDON (Reuters) – The cost of insuring Ukraine’s debt against default rose on Wednesday towards recent four-year highs and sovereign bonds fell after Ukrainian riot police moved against anti-government protesters overnight.

Police withdrew on Wednesday morning. President Viktor Yanukovich has faced weeks of demonstrations over his decision to ditch a trade deal with the European Union and strengthen Ukraine’s ties with Russia.