Halister News

(Bloomberg) -- HBSC prefers frontier markets where macro fundamentals appear to be in the process of turning around “in a positive manner” and where the sovereign bond risk premium “is still quite high,” Andre de Silva and other emerging market rates research analysts write in a report dated July 10. 

• These are Argentina, Egypt and Sri Lanka, and to a slightly lesser extent, Vietnam
  • Argentina: economic reforms have already led to significant outperformance of local and external debt
    • Reforms are expected to continue, and the credible inflation targeting by the central bank underlines our bullish stance on local currency debt
  • Egypt: favors local government bonds after some encouraging progress on IMF sponsored reforms, in particular with relation to FX adjustment
    • Recognizes signs that inflationary momentum may be fading
  • Sri Lanka: central bank has moved to inflation targeting and a flexible currency regime while the government’s focus has turned towards fiscal consolidation, following a reform program agreement with the IMF in June 2016
    • “We therefore also have long position in 10-year Sri Lanka government bonds”
• See attractive opportunities in external sovereign debt in several of these markets, among them Argentina, Costa Rica and Dominican Republic
• Remain cautious on Nigeria, Pakistan and Mongolia.

--With assistance from Tugce Ozsoy. To contact the reporter on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net