Halister News

(Bloomberg) -- Low yields and negative interest rates in developed markets mean signficant pickup may be derived from emerging mkt bonds such as Brazil and Indonesia, Brett Diment, London-based head of global EM debt at Aberdeen Asset Management says in interview in HK yday.

• Aberdeen is constructive on Russia; negative on Malaysia and Turkey
• Higher Fed rates unlikely to increase bond yields signficantly due to excess global savings

• Brazil:
• More market-friendly policy expected after president impeachment; next step likely to be a central bank rate cut
• Sees value in Brazil bonds as easing cycles are typically large
• “We have been constructive in the past few months and there is still further to go,” Diment says in interview. “In past 13 years, the minimum rate cut was 500bps, so there is some value in local currency bonds.”
• NOTE: Brazil’s central bank has kept policy rate unchanged at 14.25% since September after raising by a total of 700 bps from 2013 through 2015

• Indonesia:
• Sees opportunity to add positions in Indonesia’s medium-to- long-term bonds after recent weakness due to Fed comments
• “Makes sense” to buy Indonesian bonds as president moving quickly with infrastructure spending that is likely to boost economic growth while inflation remains under control
• NOTE: Indonesia’s April CPI was 3.6% y/y, least since Dec.

• Russia:
• Constructive on Russia
• Even though inflation has been high as a function of a weaker currency, Putin has kept a tight grip on public spending, particularly on public wages and pensions, which helped to get fiscal budget under control
• NOTE: Russia’s 5-yr govt bond yield was 9.2% yday

• Malaysia:
• Malaysia is seen as one of the most vulnerable Asian country
• A lot of underweight positions have been covered
• Country is solvent but “just not great” for investors because of ongoing issue with 1MDB
• NOTE: Malaysia’s ringgit has dropped 4.3% so far this month to 4.0800, worst performer in Asia’s 11 most traded currencies, according to Bloomberg data

• Turkey:
• Negative on Turkey as political pressure on the central bank to keep rates down means monetary policy has never been tight enough, leading to pick up in core inflation
• Turkey is an oil importer, so rebound in oil prices is bad for country

• NOTE: Aberdeen manages $420.9b in assets globally as of end March 2016