Entries filed under 'Emerging Markets'

    Argentina and Brazil: Lessons Learned the Hard Way

    May 6, 2016 11:25 AM by Lord Abbett Editorial Staff

    Argentina’s successful return to the capital markets is a reminder that elections matter. Can Brazil turn things around as well?

    It’s been four months since Argentina’s voters ousted former president Cristina de Kirchner’s populist government and replaced it with the business-friendly administration of Mauricio Macri. And the result has been little short of miraculous. Last week, Argentina returned to the international capital markets with the largest ever bond issue from an emerging market economy—its first sovereign sale in more than 15 years—and global bond investors clamored for a share. In the end, the Argentinian issue was four times oversubscribed, and $16.5 billion of sovereign bonds had been sold.

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    Emerging Markets Are Looking Attractive Again

    April 13, 2016 9:46 AM by Leah G. Traub, Ph.D.

    Emerging market asset classes rallied sharply in the first quarter.

    After a challenging 2015, emerging market (EM) asset classes—including foreign exchange, local- and hard- currency sovereign and corporate bonds, and equities—received a substantial boost in February and March 2016 due to a number of supportive factors.

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    Emerging Markets: Reading the Tea Leaves on China's Currency Moves

    August 14, 2015 1:18 PM by Leah G. Traub, Ph.D.

    China first devalues—then supports—its currency.  What exactly is going on?

    After two days of depreciating its currency, the yuan (or “renminbi”), and effectively sending global currency markets into turmoil, China’s policymakers apparently decided late Wednesday (August 12, Shanghai trading time) that the currency had fallen far enough, at least for now.  

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    El Nino: The Agricultural Sector Prepares for Impact

    July 30, 2015 2:50 PM by Lord Abbett Editorial Staff

    After a five-year absence, the El Niño weather phenomenon is back, and it may have far-reaching effects on the world’s agriculture markets.

    For some investors, events in Greece and China may take a backseat to another, more natural phenomenon: the warming of the ocean waters in the central and eastern tropical Pacific Ocean, an event better known as El Niño. As unpredictable as the weather can be, when an El Niño occurs, the location of some of that year’s biggest weather anomalies can be predicted with a higher degree of certainty than would normally occur during a year without an El Niño. And that’s important information for everyone involved in the agribusiness, including those who invest in it.

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    Rare Century Bonds Return to Emerging Markets

    June 9, 2015 10:15 AM by Jerald M. Lanzotti, CFA

    Mexico and now Brazil's Petrobras have both issued 100-year bonds. What is the appeal for the issuer and buyer?

    Would you wait 100 years to get your money back from an investment? Although it is rare, governments and companies sometimes issue bonds that exceed the life expectancy of the average person. In the United States, companies like Coca Cola and Disney and top colleges like the University of Pennsylvania have all planned for a century of anticipated needs with 100-year bond issues.

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    Should Investors Be Wary of Emerging-Market Corporate Debt?

    June 3, 2015 4:50 PM by Jerald M. Lanzotti, CFA

    A strong U.S. dollar and a few high-profile defaults have some EM investors on edge. But we don’t think they present significant problems for the market.  

    Relatively few emerging-market (EM) companies issue hard-currency bonds (that is, bonds issued in other than a local currency). Although a rapidly growing asset class—and, at roughly $1.6 trillion, one rivaling the size of the U.S. high yield bond market—the EM hard-currency bond market is still roughly one-third the size of the local currency debt sector and represents a small percentage of EM gross domestic product (GDP), a little over 8% in Latin America and less than 3% GDP in Asia, according to the Financial Times.

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    Is This a Window of Opportunity for Emerging-Market Currencies?

    May 22, 2015 10:40 AM by Leah G. Traub, Ph.D.

    The European Central Bank’s continuing commitment to quantitative easing eventually will boost the economies of emerging markets and support their currencies.

    With the European Central Bank’s (ECB) ongoing commitment to quantitative easing, we do not expect much more euro appreciation versus the U.S. dollar.  But a window of opportunity for emerging-market (EM) currencies versus the euro may be  on the horizon. And the recent support for EM currencies versus the U.S dollar remains in play, at least for the short term.

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    Market Sentiment Sinks the Ruble

    December 23, 2014 9:08 AM by Leah G. Traub, Ph.D.

    Market contagion, however, should be limited.

    When a country is facing a currency crisis, as clearly Russia is, an interest-rate hike alone, with no other measures, is a sign of desperation and a lack of understanding of the underlying situation. So it was not surprising when the market punished the ruble following a late-night decision on Monday, December 15, by the Russian central bank to hike a key interest rate by 650 basis points, to 17%. 

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    Weighing the Pluses and Minuses of a Commodities Downturn

    November 3, 2014 12:30 PM by Leah G. Traub, Ph.D.

    Sure, sharp drops in commodities prices have hurt major producing countries that have not been able to diversify their economies away from commodities, but heavy importers should benefit.   

    People forget that more than half of the emerging markets universe is comprised of commodity importers. These countries are not just exporters, which generally suffer when commodity prices drop, and the market will start to differentiate if the price declines continue. One prime example is India, which should benefit tremendously from lower commodity prices, as at least 50% of India’s total imports are commodities. So should Turkey, which hasn’t been able to implement any kind of structural reforms to control its current account deficit that is dominated by an oil imbalance. 

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    Time for Emerging Markets to Enter Decouple Counseling?

    October 31, 2014 10:40 AM by Leah G. Traub, Ph.D.

    While emerging markets have continued to outpace developed markets, the differences in economic policies have been dramatic

    Looking back at the third quarter, investors were struck by how much the policies of developed and emerging markets have diverged from one country to another. While the U.S. Federal Reserve and the Bank of England are generally expected to hike interest rates in the next six to nine months, the European Central Bank (ECB) is cutting interest rates and beginning a quantitative-easing program of its own. The Bank of Japan, meanwhile, may have to enlarge its quantitative-easing program.

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